What to Do if You Can't Make Your Personal Loan Payment

Personal loan lenders would rather work with you than send your account to collections, but only if you contact them before you miss a payment.

Maybe you've compared personal loans and weighed the pros and cons of personal loans carefully before borrowing, but circumstances have changed. This guide shows you how to contact your lender, which hardship programs to request, what you can realistically afford, and your rights if debt goes to collections.

Step 1: Contact Your Lender Before You Miss a Payment

Calling your lender the moment you realize you can't make a payment is critical. Most lenders have dedicated hardship departments trained to help borrowers navigate temporary financial difficulties.

In my experience, lenders are far more flexible before the first missed payment. Once a loan goes 30 days past due, it gets reported to credit bureaus, and collection activity begins.

What to Say to Lenders Before You Miss a Personal Loan Payment

Be direct and specific. Use this script: "I'm experiencing temporary financial hardship due to [job loss, medical emergency, reduced hours]. I want to work with you before I miss any payments. I've been a responsible borrower. Can you tell me about hardship programs or payment modification options?"

What Documents to Have Ready Before Calling

• Financial snapshot: Monthly income and essential expenses (housing, utilities, food, transportation).
• Documentation: Bank statements and proof of hardship (termination letter, medical bills).
• Proposed payment: What you can realistically afford based on your budget.

Pro tip: Call your lender on Tuesday-Thursday mornings when call volumes are lower.

Step 2: Understand Your Hardship Options

Lenders offer several formal assistance programs, such as:

• Forbearance: Temporarily pause or reduce payments for 1-3 months. Interest continues accruing. Best for short-term crises.
• Deferment: Moves payment due dates forward by 1-3 months, extending your loan term. Missed payments go to the end of your term. Best for short-term relief with a specific restart date.
• Modified payment plan: Reduces monthly payments for 6-12 months by extending your loan term. Demonstrates good faith and looks better to credit bureaus than complete forbearance. Best when you can afford some payment but not the full amount.

Pro tip: If your hardship will last 2-3 months, deferment typically costs less than forbearance. For longer periods of reduced income, a modified payment plan makes more sense.

Step 3: Calculate What You Can Realistically Afford

Before negotiating, assess what you can truly afford. Proposing an unrealistic payment plan makes your situation worse.

• Create a bare-bones budget: List only essentials: housing (minimum rent/mortgage), utilities, food (groceries only), transportation (car payment, insurance, gas), minimum debt payments, and essential medical care. Everything else gets eliminated.
• Calculate what's left: If essential expenses total $2,800 and income is $3,200, you have $400 for loan payments. This becomes your starting point.
• Be specific: "I can commit to $250 monthly for the next four months while in reduced-hours status. My employer confirmed I'll return to full-time on [date], when I can resume my full $465 payment." This specificity shows you've done the work.

Step 4: Know What Happens If You Don't Act

Knowing exactly what's at stake helps you weigh your options and act decisively. Many borrowers avoid calling their lender because they don't realize how quickly damage escalates once they hit that 30-day mark.

Credit Score Impact on Late Personal Loan Payments

According to myFICO, payment history accounts for 35% of your FICO Score. Here's the damage timeline:

• 30 days late: Credit score drops 60-110 points. Late payment remains on your report for seven years.
• 60 days late: Additional 20-40 point drop. Collection calls intensify.
• 90 days late: Another 20-40 point drop. Account approaches charge-off.
• 120-180 days late: Lender charges off the account and sells it to collections. Total score drop: 100-150+ points.

Collection Activity

Once in collections, agencies can pursue payment aggressively. If they sue and win, they can garnish wages (typically 25% of disposable income), levy bank accounts, or place property liens.

Step 5: Understand Your Rights If Debt Goes to Collections

If your account reaches collections, don't panic. You have significant legal protections that limit what collectors can do.

Your Rights Under the Fair Debt Collection Practices Act

The FDCPA is a federal law designed to protect you from abusive collection practices. According to FTC guidance, here's what collectors can and can't do:

• Collectors can't: Harass, threaten, or use profane language. Call you before 8 a.m. or after 9 p.m. Contact you at work if they know your employer prohibits it. Discuss your debt with family, friends, or coworkers. Lie about the amount you owe or threaten actions they can't legally take.
• You have the right to: Request written verification of the debt within five days of first contact. Dispute any inaccurate balance or information in writing. Negotiate a settlement or payment plan that works for your budget. Stop all contact by sending a written cease communication letter via certified mail with a return receipt.

Negotiating With Collectors

From my experience, borrowers think collections means it's over. However, collection agencies buy debts for pennies on the dollar, which means they have room to negotiate.

A respectful conversation where you acknowledge the debt but explain your financial constraints can result in significantly reduced payments, waived fees, or settlements for 40-60% of the original balance.

The key is approaching negotiations with documentation of your income and expenses, a realistic payment proposal, and a willingness to get any agreement in writing before making payments. A paid collection account looks better on your credit report than an unresolved one.

Avoid Predatory "Solutions" That Make Your Situation Worse

When you're desperate, certain products seem like lifelines but actually dig you deeper. I've seen borrowers use these, thinking they're buying time, only to face multiple crises.

• Payday loans: Charge 300-400% APR, require repayment within 2 weeks. According to CFPB research, 80% are rolled over within 14 days because borrowers can't repay them. You'll pay $75 to borrow $500 for 14 days, then another $75 to roll it over. After a month: $150 in fees, still owe $500.
• Credit card cash advances: Carry 25-30% APR with immediate interest plus 3-5% fees. You're trading lower-rate debt for higher-rate debt.
• 401(k) loans: If you lose your job, most plans demand immediate repayment. If you can't repay, the balance becomes taxable income plus a 10% penalty if you're under 59.

Consider Non-Profit Credit Counseling for Expert Help

If you're overwhelmed, non-profit credit counseling agencies can secure concessions that individual borrowers can't get.

What Credit Counselors Provide

• Debt management plans: Counselors review your finances and create comprehensive plans. They negotiate directly with lenders for reduced rates (sometimes cutting by 50%+), waived fees, and modified payments.
• Single point of contact: You make one monthly payment to the agency, which distributes funds to creditors. This simplifies your finances and improves payment consistency.
• Cost: Service is typically free or low-cost ($20-50 monthly for a debt management plan).

How to Find Reputable Credit Counseling Agencies

Look for agencies accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). These organizations maintain strict quality standards and ethical guidelines that their members must follow.

Avoid These Credit Counseling Red Flags

When borrowers are desperate, they become targets for personal loan scams and predatory credit counseling services. These agencies prey on financial stress, promising quick fixes that don't exist. Here's what to watch for:

• Upfront fees: Legitimate agencies don't demand payment before providing any service. If they want money up front, walk away.
• Unrealistic promises: No one can "fix" your credit score in 30 days. Be wary of any agency making guarantees about quick credit repair.
• High-pressure tactics: Legitimate counselors take time to review your complete financial situation. If they're pressuring you to sign up immediately, that's a red flag.
• No accreditation: If an agency lacks accreditation from recognized national organizations like NFCC or FCAA, don't work with them.

Methodology

• Data sources: Hardship program information and collection procedures are based on Consumer Financial Protection Bureau guidance and Federal Trade Commission consumer protection resources. Credit score impact data is sourced from myFICO credit education materials and FICO Score research.
• Expert review: All lending concepts, hardship strategies, and borrower rights were verified by Leanora Benjamin (NMLS # 2283860), mortgage loan officer and loan consultant, for accuracy and practical applicability.
• Limitations: Hardship program availability and terms vary by lender. Credit score impacts depend on individual credit profiles. Figures reflect typical ranges as of November 2025 and may vary.
• Transparency note: BestMoney.com is committed to objective, editorially independent content that empowers consumers to make informed financial decisions.

Conclusion: Take Action to Protect Your Financial Future

Once you are equipped with the expert knowledge to choose the right loan, it is crucial to understand how to manage it responsibly through life’s inevitable ups and downs. The difference between a temporary setback and a financial crisis comes down to timing. Contact your lender before you miss a payment, not after. Hardship programs exist specifically for situations like yours, but they're only available to borrowers who communicate proactively. Once your account hits 30 days late, your options narrow, and the damage to your credit begins.

Your lender would rather work with you than send your account to collections. Use that to your advantage. Pick up the phone today, explain your situation honestly, and propose a realistic solution based on what you can actually afford to pay your personal loans.

Frequently Asked Questions

1. How long does a missed payment stay on my credit report?

Late payments remain for seven years from the original delinquency date. Their impact decreases over time, and consistent on-time payments after the late payment gradually rebuild your credit.

2. Will my lender report my hardship program participation?

This depends on your agreement. Some lenders report "current" status during hardship periods, others report "partial payment." Get written confirmation before agreeing to any program.

3. Can I negotiate my loan balance down?

Lenders won't reduce principal unless your account has defaulted. Before default, they offer payment modifications. After charge-off, collection agencies may settle for 40-60% of the balance.

4. Should I prioritize my personal loan or credit card payments?

Prioritize secured debts first (mortgage, car) since you can lose property. Between unsecured debts, choose based on which lender offers better hardship assistance.