Delinquent Account Meaning
A delinquent account is an account which has not been paid even after the due date of the payment has been passed for that account. It is that account which is marked as delinquent for which the account holder does not pay the outstanding value by even 1 day over the due date of the required payment. Generally, banks do not mark an account as delinquent so early and immediately. They send you reminders before making the account a delinquent one. Nowadays what banks do is they consider 2 late payments to term an account as a delinquent account.
Delinquent Account Credit Report
The effect of a delinquent account of a consumer has a very adverse impact on the Credit report of the consumer. Once an account is termed as a delinquent, then such an account can take almost seven years to removes if the effect of delinquency from the credit score of the consumer. There are also cases of multiple delinquencies of a consumer. The longer the delinquencies stay in an account, the severe would be its effect on the credit score. For example, let us say, a person has multiple delinquencies in his account, and therefore his score could drop as much as up to 150 points.
The delinquency does go away with the payment of the outstanding amounts. Even after making full payments and clearing off the entire dues of the loan will also not release the effect of delayed payment, non-payment of the loan. It stays in the credit score up to a period of up to 7 years. Therefore, it is best for consumers to stay away from the delinquency of the accounts.
An account is termed as a delinquent account only when it is a case of late payment or skipped payment.
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#1 – Late Repayment
In case of loan repayments, if the consumer makes any late payment of the installments be it in case of a car loan, home loan, business loan, personal loan if a person is involved in the late repayment of the loan, then he would be called a delinquent account holder.
#2 – Non-Payment
In case of non-payment of the loan amount even after the reminders from the Financial Institutions, it causes a regular account to be converted to the delinquent account. It affects the credit score of such consumers adversely and creates a considerable fall in their Credit Score, and they will not be able to apply or avail any kind of loans from any financial institution in the future.
#3 – Non Payment of Credit Card Bills
Non-payments of the Credit card bills also result in making the account a delinquent account. If a Credit Cardholder does not pay the minimum amount due for over 30 days even after the expiry of the due date for clearing the bills, such Credit Cardholders account will be converted and marked as a delinquent account.
Delinquent Account Examples
- Outstanding Car Loan Account for six months;
- Outstanding Home Loan Account for one year;
- Outstanding Minimum amount on a Credit Card is a Delinquent Credit Card;
- Non-payment of a personal loan EMI;
Effects of a Delinquent Credit Card
In case a credit card is delinquent for more than 60 days, then the Credit Card Company can begin a legal process against the holder of the credit card for the collection of its outstanding amount on the credit card. There would be various penalties imposed on the cardholder along with the substantial amount of Interest portion on the outstanding amount. The cardholder has to clear all the dues to save himself from the legal proceedings.
The credit card companies also take the help of the third parties to get their dues cleared from the holders, which will force the holder to sell off its stake, property, holding, investments to clear off the dues. The credit card holder in order to remove delinquency from his credit card, the holder as a first step, must clear the minimum amount due to be paid, this will help him somehow from the delinquency of the account but would not be able to assist in the interest which would be charged on the consumer on balance outstanding amount.
How to Deal with the Delinquent Account?
- Once you identify the delinquent account, also identify the outstanding amount which is to be paid. Make sure that the delinquency has taken place only because of the non-payment of the outstanding amount and not due to a systematic error. In case you have made the payment, and it is not reflecting in the account due to the system error, go ahead to the Financial Institutions with the payment proof and get your delinquency cleared.
- If a consumer is not able to pay the outstanding amount monthly, then he should opt for a lump sum payment of the amount and utilize its bonuses, increments, etc. for clearing the loan amount. The consumer should make as many attempts to clears its outstanding loans as soon as possible to keep themselves relieved from the substantial amounts of interest.
- If the consumer is not able to pay its loan in lumpsum, then the consumer should inquire with its lenders and request them to further convert his loans into smaller installments to avoid the massive interest liability on him and be able to pay such small installment.
- If any of the above doesn’t work, then the consumer should go for settling the account and think of an amount that he can pay in full settlement of the amount. This step will not help the consumer to remove the delinquency mark on his account but will help the consumer to not to pay the substantial interest on the outstanding amount.
This has been a guide to Delinquent Account and its meaning. Here we discuss delinquent account credit reports along with its causes, examples, and how to deal with it. You may also have a look at the following articles –