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What’s Going to Happen When You Default on a Personal Loan?

If you are considering defaulting on your personal loan for any reason, we implore you not to do it for your own sake. You might not know it, but defaulting results in serious consequences, including potentially irreversible damage to your credit score.

You may have planned to repay your personal loan when you signed the agreement, but for some reason, perhaps a job loss, an unexpected health problem, or others, you missed a payment. Now you are on the verge of defaulting. But do you know exactly what will happen when you do not take action and default on your loan?

In this post, Get Approved Canada, your trusted provider of the best personal loans, tells you what you can expect if you default:

When Is a Personal Loan Considered in Default?

A personal loan is considered in default when a payment is late by 30 days up to 90 days (depending on the type of loan and the loan agreement terms). 

If you are a few days late, it can be considered delinquent but not yet in default. You may be asked to pay a late fee after the 10-15 days grace period. This can either be a certain percentage of the payment or a specific amount that often ranges between $15 and $40.

If the payment is at least 30 days past due, the lender can report it to the credit bureaus as a late payment, and it can take off as much as 100 points from your credit score. That is if you have a good or excellent credit score between 690 and 850.

Aside from damaging your credit score, the effects of defaulting will be reflected on your credit report for seven years. That means you’re going to find it hard to find a lender who will approve another loan application. 

Consequences of a Loan Default

Once the loan defaults, the lender will transfer the unpaid loan balance to their in-house collections department or sell it to a third-party debt collection company. Expect lots of letters and emails, text messages, and phone calls as the collection company wants to recover the debt. 

If the loan is unsecured, you can even be taken to court for the repayment. They can put a lien on one or more of your assets, including your home. Even if you don’t own a property that they can seize, though, that doesn’t mean they can’t find ways to make you pay the loan back. 

Of course, if the loan is secured, the lender will seize that asset as agreed upon. If someone cosigned the loan contract, that person would end up having to pay up your default. 

What You Should Do if You Are Facing Default

If you are facing default, the last thing you want to do is to ignore it. Be proactive and speak with the lender. Inform them of the reason that your payment got delayed. The lender may even help you by providing an extension or even temporary suspension if they believe your reasons are valid. 

If it has gone beyond that and you are now facing a lawsuit, the only way to deal with it is to get legal help to determine your best course of action. You should also speak with a credit counseling expert who can help you come up with a plan on how you can pay all your debts. 


No one wants to be in a position where they’ll need to default on their personal loans. However, if you find yourself in a circumstance where you face this dilemma, the best thing to do is to reach out to the lender to work out how you’ll proceed with the payment. There’s always a chance that they could make adjustments for you, be it on the due date or when you’ll have to start paying again if they’re giving you some time due to your current situation. Ultimately, just make sure you take control of the situation. Otherwise, you’ll ruin your chances of getting approved for other loans like a mortgage application. 

If you are looking for the best personal loans in Ontario or considering debt consolidation, Get Approved Canada is here for you. We offer fast and easy financial solutions to all our clients. Contact us today and get approved the same day!


Hi, I’m Gavin, the loan specialist and official mascot at Get Approved Canada. Whether you’ve got good credit, bad credit, or even no credit – our team can help. We work with lenders who look at other things like income and assets to determine your car loan approval and not just your credit score.

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