What Is Loan Delinquency?

Loan delinquency is a failure to make loan payments on time. It is different from a loan default which is when you fail to repay a loan in accordance with the agreed upon terms. Loan delinquency is often an early stage on the path to a default, because before failing to repay a loan, you are late making the payments.

Delinquency Period

During the delinquency period, a lender may be more willing to work with you to reach an arrangement that can provide repayment assistance. By the time a loan has reached the state of default, the lender tends to take the attitude that you will not repay the loan and that legal action is required. It is usually only after a loan passes through delinquency and into default that the foreclosure process begins.

Delinquency and Default

Loan delinquency is a widely reported statistic under the current economic landscape. This is because you can assume that most loans that are delinquent will ultimately end up in default. The delinquency rate, which recently topped one in seven, serves as an early warning for lenders. Making a few late payments does not result in your loan becoming delinquent. Delinquency occurs when you are seriously behind in making scheduled payments.

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