What happens if I default on a personal loan?

The default sequence is consistent across lenders. After 30 days late, the late mark appears on your credit. After 60-90 days, the lender escalates collection efforts. At 180 days, the lender charges off the debt and typically sells it to a third-party collection agency.

The collection agency typically paid 4-14 cents on the dollar for the debt. They have strong financial incentive to recover even a fraction of the face value, so they often pursue aggressively. Under the federal Fair Debt Collection Practices Act (FDCPA), they have specific rules they must follow, including not calling at certain hours, not threatening legal action they can't take, and stopping contact after a written cease-and-desist for work calls.

In most states, the collection agency can sue you in civil court to obtain a judgment. A judgment unlocks wage garnishment (typically up to 25% of disposable income) and bank-account levies. The window to sue is limited by your state's statute of limitations (usually 3-6 years from your last payment).