When a debt goes unpaid, the repayment amount of the debt can increase due to late fees or decrease if you are eligible for a settlement. Paying a debt before it defaults can prevent legal action and an even higher repayment amount.
Significance
When you are late on a debt payment, the payment amount required may change.
Considerations
Once a debt is delinquent, the creditor often adds penalty fees, which increase the amount you must pay to bring the debt current again.
Settlement
A creditor will sometimes be willing to accept less than you owe on a debt. This is known as a settlement, and to a creditor, collecting a lesser amount is better than not collecting any payment at all.
Interest Rate
Allowing your debt to become delinquent will result in a higher interest rate. This can quickly increase the amount that you owe and the amount of your required payments.
Warning
If a delinquent debt goes unpaid long enough, it will default and the creditor may sue you for the balance. If this occurs, you will be responsible for the debt along with the court costs.
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