Past Due

Past due is a loan payment that has not been made as of its due date. A borrower who is past due may be subject to late fees, unless the borrower is still within a grace period. Failure to repay a loan on time could have negative implications for the borrower's credit status or cause the loan terms to be permanently adjusted.

An individual or business who takes out a loan or credit from a lending institution is expected to repay the loan either as a lump sum or in monthly installments. The amount to be repaid is either the full amount that was borrowed or a portion of it. Some loans are taken out once and are required to be repaid to the lender in monthly installments. For example, when a borrower takes out a first mortgage on a home purchase, he does so once but he is expected to pay off the loan monthly and could take decades to complete his or her payment schedule. On the other hand, some loans are taken out continuously and depending on how much or how frequently a borrower takes on credit, he will be required to repay the amount at certain fixed dates. An individual with a line of credit or credit card account can dip into the credit balance available in these accounts anytime, but is required to make a pre-specified minimum payment every month. In this case, borrowing and repayment is continuous.

A borrower who does not make the required payment on the date due, will have his account set to past due. If a loan payment is due by the 10th of the month and is not paid by the 11th, the payment will be considered past due. Depending on the policy of the lender, the borrower will either immediately be charged a late fee or will enter a grace period. If, for example, there is a grace period of 10 days, the borrower would not be charged a late fee until the 21st of the month. If the payment is still not made by the end of the grace period, late fees or additional interest will be applied. How a customer is treated on a past due payment will often come down to their payment history; if there is a pattern of late payments, the grace period may be shortened or removed.  

When a borrower who is overdue on his payments receives his next account statement, the balance owed will be the current balance plus his overdue balance plus any late charges and interest fees. To bring the account up to good standing, the borrower must make the required minimum payments including any late fees. If the lending institution increased the interest rate on the account as a penalty, it will only bring down the interest rate to its original level after payments have been made on time for six consecutive months.

An individual or business that is 30 days behind schedule on loan payment will have his credit report reflect the delinquent account. The borrower’s credit score will fall once his overdue payments have been reported to the credit bureau.

After 180 days of not making payments on the overdue account, the debtor would not have the option to pay in installments anymore; full payment must be made. Usually, by this time, the lender may have sold the debt to a debt collections agency, and written off the uncollected amount as a bad debt on its balance sheet. It is important to note that past due debts can remain on one’s credit history for seven years, therefore, a borrower should ensure that his accounts are in good standing with the lender.