Default is when a borrower fails to make timely payment of the due amount as per a predefined payment structure. For example, it could be either interest payment or interest and principal amount payment.

In simple words, default is when the borrowers fail to pay bills on time.

A lending institution initiates the debt collection process.

Moreover, when you don’t pay your debt on time, you might find yourself in a situation where you have to pay fines and interest. You might also have to pay additional fees for late payment or non-payment of debt.

Debt collection is the process of pursuing payments of debts owed by individuals or businesses. It involves the collection of overdue installments, due penalties, imperfect obligations, or any other charges.

An organization specializing in debt collection is known as a debt collection agency or debt recovery agency. These agencies work as per the process guidelines defined by lending institutions.

Debt collection agencies can contact the borrower via different communication modes or make a physical visit as per the defined process by the lending institutions.

If you owe money to a Creditor, you are responsible for paying it. However, there are many negative consequences of not paying an overdue debt and going to collections.

However, it is essential to check the person’s identity and ensure that the lending institution authorizes the person to collect money from you.

When you fail to pay the borrowed amount as per the agreed payment schedule, the payment default is reported to credit bureaus periodically. Therefore, this default or delayed payment reflects in your credit report.

Every lender institution follows guidelines given/set by regulators. Accordingly, your account is being reported to credit bureaus. There are various stages of default. Therefore financial institutions take action.

A credit report is a history of your credit behavior and contains detailed information on your loan and credit. Credit Reports are obtained from Credit Bureaus.

Credit bureaus get information from your creditors, such as banks, NBFCs, credit card issuers, auto finance, or housing finance companies.

Any default in credit card or loan payments will negatively reflect your credit score. The longer your dues remain unpaid and the greater the frequency of unpaid bills, the harsher the impact on your credit score.

However, if your payment is regular and if your credit score is good, it will be considered a healthy credit report