nrgins

Can they default a loan if you're not 30 days late?

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I took out a loan with CitiFinancial (now One Main Financial) 4 years ago, with payments of $175/mo. There were only about 4 payments left on the loan. However, I have been late with each payment the past few months, paying each about 3 weeks past the due date (which incurred late fees, which they deducted from my payment). I have never been 30 days late with a payment, and have made all payments.

 

Last night I logged into my account to make a payment (for the payment that was due in May), and, instead of showing me a total due of $350 (May's past-due payment plus the currently-due June payment), it showed me a total due of $676, which is the balance of the loan. It also showed a Past Due amount of $676, with a Past Due Date in May.

 

This is leading me to think that they defaulted my loan, and are now saying that I owe them the full amount. Obviously, I'm concerned about this affecting my credit report.

 

I made the May payment last night, so now I'm technically "current" with my loan, as the June payment isn't due yet.

 

I left them a message last night, and am planning on talking with them today. But I'd like to know what the law says before I get on the phone with them. Do they have to right to default a loan if I've never been 30 days late with a payment, even if I've been habitually late with my payments?

 

Any advice given would be greatly appreciated. I am in the State of Texas.

 

Thanks!

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Most likely what they did is enact the acceleration clause.  Unlike CC debt, loans typically have an acceleration clause that states if the borrower is late on the payment they can immediately call the balance of the loan due.  

 

Nothing in the loan contract states the consumer must be 30 days late to enact the clause.  Late is late.  The 30 days applies to reporting it to the CRAs as a late payment.  When it comes to auto loans those contracts typically also state they can repossess immediately upon being late after any grace period that is named in the loan.  Many states have laws on the books that say a lender on an auto loan does not have to wait 30 days to repossess and can move to do so immediately when the consumer is late.  Now that said most lenders do not repossess immediately when late because many consumers do get it worked out.  

 

They cannot report it to the CRAs until you have been 30 days late.  However the terms of the loan contract you signed determine if they can consider chronic late payments of up to 3 weeks as a default that can be reported.  You need to pull out the documents and see what they say.

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I do not see them repoing the vehicle, if you only owe 676 and they sell your vehicle at auction they will owe you some money, as I am sure the vehicle would bring more than that at auction.

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I do not see them repoing the vehicle, if you only owe 676 and they sell your vehicle at auction they will owe you some money, as I am sure the vehicle would bring more than that at auction.

 

It's not an auto loan. It's a personal loan. My only concern is the effect on my credit report.

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They cannot report it to the CRAs until you have been 30 days late.  However the terms of the loan contract you signed determine if they can consider chronic late payments of up to 3 weeks as a default that can be reported.  You need to pull out the documents and see what they say.

 

I'm pretty sure I don't have the original documents. Not sure what my options are at this point except just to pay the full balance before it's 30 days past due?

 

And even if they enacted the "acceleration clause", it had to have been recently, since my last statement from them showed everything was fine. So wouldn't I have 30 days from the time the acceleration clause is enacted, since I'm currently current on the loan?

 

Thanks!

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It may be a personal loan but was this backed by collateral like a vehicle or you bank account? If not the only recourse they have is to let you pay the balance or sue you.

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I believe there was some listing of collateral, such as furniture and appliances, etc. But they're not a lienholder on my vehicle or anything.

 

In any case, my concern is either: a) getting it worked out with them, or b ) paying it before it negatively affects my credit report. I don't think it'll come to collections either way. But I'm concerned about it affecting my credit report and how long I have to pay it before it does, assuming they accelerated the loan.

 

And does a loan acceleration, in and of itself, negatively affect one's credit report?

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Given the small nature of the balance I doubt acceleration of the loan would affect your credit.  There is no where on a CR for reporting acceleration.  If none of your payments went 30 days or more then it has to be reported as paid on time.

 

It is more likely that they are tired of the late payments and just want to close out the account since it is so close to payoff.

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OK, just got off the phone with them. Turns out it was just a computer thing.

 

A few years back I got a partial deferment on the account, allowing me to me a smaller monthly payment for several months when I was having some financial difficulty. As a result of that, the loan now went past the original closing date (4 years from start date), so their computer system "closed out the account," and shows the full amount due.

 

I spoke with the branch manager, and she said not to worry about what the computer shows, to just continue to make the monthly payment until it's paid off. She said normally they'd refinance it for the amount that's left; but because I got the deferment, they can't refinance it.

 

I did ask her specifically about the acceleration, if that had happened, and she said, "Oh no, trust me, you'd know if we accelerated your account. That's more of a legal thing, and you would know well in advance. But you're only past due for May, so, no, we didn't do that."

 

So, all's well that ends well, it seems.

 

Thanks a lot for your assistance. Even if it turned out to not be the acceleration thing, it was still helpful to have some idea about what it might have been.

 

Thanks!

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