A bill is a legal financial obligation. Neglecting to pay your bills, or even failing to pay them on time, can lead to serious legal and financial consequences. You will be charged late fees, interest and other penalties. Also, your bad payment records will be reported to credit agencies, causing a negative impact on your credit score. In extreme cases, you could even lose your home, car or other property.
Late Fees and Penalties
Incurring late fees and penalties is one of the most immediate consequences of paying a bill late. The Internal Revenue Service (IRS), for example, charges a daily interest fee on overdue taxes. Credit-card companies and utilities also typically add a late fee when bills are past due more than 30 days. Late fees and penalties increase your debt obligation and lengthen the time it takes to pay off the bill in full.
Impact on Credit Rating
Late payments may affect your credit score. According to "The Real Impact of Late Payments," an article by Dayana Yachim on "The Motley Fool," the effect may not be immediate and your creditor may not immediately report a late payment -- some creditors grant a little leeway. Nonetheless, if a bill is 90 days late or more, the impact on your credit is substantial. According to Yachim, the damage may be as harmful as a bankruptcy or a tax lien, and the information remains on your credit report for seven years.
Collections and Other Legal Proceedings
Creditors do not wait for your payment indefinitely. Eventually, they will seek legal recourse to collect on their debts. Late payments may be subject to collection actions and other legal proceedings that the debtor will have to pay for in addition to the amount of the original bill. If you fail to pay your mortgage on time, the lender may eventually seek to foreclose on the property.
Other Issues
Poor credit scores hurt your chances of securing loans and other financing in the future. Collections and foreclosures could result in garnishments, liens and even the loss of title to your property. If you experience financial trouble, you should inform your creditors immediately and seek financial assistance from a professional.
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