 TITLE: Are Unsecured Loans a Good Idea? CONTENT: What Happens if You Default on an Unsecured Loan?\n-------------------------------------------------\nMissing payments and defaulting on an unsecured loan won't cost you any collateral, but it tends to have a major impact on your credit. Because your payment history is the biggest factor in your credit score, missing even one loan payment can significantly affect your credit score.\nWhen you miss a payment, the lender will notify you—typically more than once—and may give you a 30-day grace period to bring your account current. If you fail to do so, eventually the lender will send your account to their in-house collections department or transfer it to a third-party collection agency. At that point, the past-due payment is reported to credit bureaus and shows up on your credit report.\nThe lender will try to get payment from you one way or another, and may even resort to filing a lawsuit to collect payment. Once your debt is in collections, your original account with the lender may show up on your credit history as a charge-off, indicating that the lender hasn't been able to collect from you and has given up. Your collection agency account will appear on your credit report as a separate account.\nCollection accounts stay on your credit report for seven years from the original delinquency date, even if you pay off the debt. Having an account in collections is a serious negative mark on your credit report that can drag down your credit scores and make it harder to get approved for credit in the future, or cause you to be charged a higher interest rate. END