Default

Default is the formal end of the road for a missed payment, not the beginning of it. A payment is late immediately, reported to the bureaus at around 30 days, and only after a period set by the contract — commonly 90 to 180 days for consumer debt — is the loan declared in default and handed to collections or written off.

What happens next depends on whether the debt is secured. With collateral behind it, the lender takes the asset: repossession for a vehicle, foreclosure for a home. Unsecured debt leaves the lender suing, selling the account to a collector, or garnishing wages where state law allows.

The credit damage is severe and long-lived. A default and the delinquencies leading to it generally stay on your report for seven years, and they hit hardest immediately, raising the cost of every loan you take during that window.

Federal student loans are their own category, with both harsher and gentler rules. Default can trigger wage garnishment and seizure of tax refunds without a court judgment, but the system also offers rehabilitation and consolidation routes back to good standing that private lenders rarely match.

Almost every lender prefers a conversation to a default, because recovering through collections is expensive and rarely returns the full balance. Forbearance, a modified payment plan, or a temporary hardship arrangement are usually available, and they are only available before the account is written off.