Definition
Delinquent is a term used to describe a situation where a borrower has not made a payment by its due date and any agreed-upon grace period has also passed. Delinquency typically precedes default status, signaling that an obligation, such as a loan or mortgage payment, is overdue but not yet defaulted.
Examples
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Mortgage Delinquency: A homeowner has a monthly mortgage payment due on the first of the month but fails to make the payment by the tenth of that month (assuming a 10-day grace period). This mortgage is now considered delinquent.
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Credit Card Delinquency: An individual’s credit card payment was due on the 15th of the month, but they failed to pay the minimum amount due by the 30th. The account becomes delinquent as of the 31st.
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Rent Delinquency: A tenant’s rent is due on the first of the month, but by the third, the payment has not been accounted for, making the rental payments delinquent.
Frequently Asked Questions (FAQs)
What is the distinction between delinquent and default?
- Delinquent: Indicates overdue payments but no legal actions have yet been taken.
- Default: Indicates a failure to meet the legal obligations, leading to potential legal actions like foreclosure.
How does being delinquent affect my credit score?
Delinquency can significantly lower your credit score, appearing on your credit report and indicating financial unreliability.
Can delinquency lead to foreclosure?
Yes, prolonged delinquency can lead to default, and eventually foreclosure if the debt continues to go unpaid.
What is the typical grace period before a payment is considered delinquent?
The grace period can vary but typically spans between 10 to 15 days after the initial due date.
How can I avoid becoming delinquent on my mortgage?
To avoid delinquency, set alerts for due dates, set up automatic payments, and communicate with your lender if you anticipate payment issues.
Related Terms
- Default: The failure to repay a loan according to the terms originally agreed upon.
- Grace Period: A set period after the due date during which a payment can be made without penalty.
- Foreclosure: The legal process by which a lender takes control of a property after the borrower defaults.
- Mortgage: A loan used to purchase or maintain a home, land, or other types of real estate.
Online Resources
- Consumer Financial Protection Bureau (CFPB): CFPB Mortgage Help
- Federal Trade Commission (FTC): Understanding Your Credit Scores
- HUD (U.S. Department of Housing and Urban Development): Avoid Foreclosure
References
- Federal Trade Commission. “Understanding Your Credit Scores.” FTC.
- U.S. Department of Housing and Urban Development. “Avoid Foreclosure.” HUD.
Suggested Books for Further Studies
- “The Unofficial Guide to Managing Your Personal Finances” by The Unofficial Guide
- “Your Score: An Insider’s Secrets to Understanding, Controlling, and Protecting Your Credit Score” by Anthony Davenport
- “The Richest Man in Babylon” by George S. Clason
