What Happens If You Default on an Avant Payment?
Defaulting on any loan payment can have serious consequences – and an Avant loan is no exception. If you miss too many payments on your Avant personal loan, it could lead to penalties, fees, damaged credit, debt collections, and even potential legal action.
But don’t panic just yet. This article will walk through exactly what to expect if you default on an Avant loan, as well as some tips on how to potentially avoid or mitigate the fallout. We’ll cover:
What Constitutes Default on an Avant Loan?
First things first, let’s define what it actually means to “default” on your Avant loan. With most lenders, including Avant, your loan goes into delinquency status if you miss a single payment. However, you don’t officially default until you’ve missed several consecutive payments – typically around 90-120 days worth.
So if you just accidentally missed one payment due date, you haven’t defaulted yet. You’ll likely get hit with a late fee (up to $25 from Avant), but you can still get back on track by making the payment ASAP.
However, once you hit that 90-120 day mark of non-payment, that’s when Avant will officially consider your loan to be in default status. At that point, some not-so-fun consequences can start kicking in:
-Potential Consequences of Defaulting on Avant
Credit Score Damage: Avant will report your default to the major credit bureaus like Experian and TransUnion. This negative mark can then severely impact your credit score for 7 years or more. A lower credit score makes it harder (and more expensive) to get approved for future loans, credit cards, mortgages, rental housing, etc.
Fees and Added Interest: In addition to those pesky late fees, Avant may tack on additional interest charges the longer your loan remains in default. They could also pursue you for the full remaining balance owed on the loan principal.
Debt Collections: After enough non-payment, Avant is likely to hand over your debt to a third-party debt collection agency. Then you’ll start getting those annoying collection calls and letters demanding payment. This reddit thread has stories of people’s experiences with Avant sending debts to collections.
Potential Lawsuit: In some cases, Avant or the debt collector may decide to sue you in court over the unpaid debt amount. If they get a judgment against you, they could then pursue wage garnishment or put liens on your property. This Quora thread has people discussing being sued by Avant over defaults.
Difficulty Getting Future Loans: Even after the 7 year period when the default falls off your credit report, Avant may keep an internal record. This could make it very difficult (or impossible) to get approved for another Avant loan down the road.
So in summary – defaulting is a big deal that can mess up your finances for years to come. Let’s look at some better options to get ahead of it.
What to Do If You’re Struggling to Make Avant Payments
If you’re having trouble affording your monthly Avant loan payments, the absolute worst thing you can do is just ignore the situation and let it slide into default. Avant and other lenders would much rather work something out with you proactively.
As soon as you realize you may have difficulty making an upcoming payment, you should be upfront and contact Avant directly. Explain your financial hardship situation honestly, and see if they can make any accommodations, like:
Temporary Forbearance: Some lenders may allow you to temporarily postpone or reduce your monthly payment amount if you’re going through short-term financial hardship. This gives you a chance to get back on your feet.
Interest-Only Payments: Instead of making your usual payment covering both principal and interest, Avant may allow you to just cover the interest portion for a period of time.
Modified Payment Plan: Avant could potentially extend your loan term by adding more months to the end of your payment schedule. This would lower your monthly payment amount, though you’d pay more total interest.
Settlement for Less Than Owed: In some cases, Avant may allow you to settle and pay off the loan for less than the full remaining balance if you can make a lump-sum payment. This is discussed on the Avant subreddit.
The key is being proactive and maintaining open communication with Avant about your situation. The lender is much more likely to work with you if you’re upfront, rather than just ghosting them and letting it slide into default.
How to Minimize the Damage If You’ve Already Defaulted
Okay, so let’s say the worst-case has already happened – your Avant loan has officially defaulted after months of non-payment. Don’t lose hope, there are still some potential routes to mitigate the fallout:
1) Request a Pay for Delete
Once your loan has already been charged off by Avant and sold to a debt collector, you may be able to settle the remaining balance for a lump sum “pay for delete.” With this agreement, the debt collector agrees to remove the entire derogatory item from your credit report in exchange for you paying off the negotiated amount.
Pay for deletes can help minimize the long-term credit score damage from a default. However, debt collectors are under no obligation to accept these deals. It’s something you’d have to negotiate on a case-by-case basis.
-2) Negotiate a Settlement for Less Than Owed
Even if a pay for delete is off the table, you can still try negotiating with the debt collector to settle the defaulted Avant loan for less than the full outstanding balance. Debt collectors often purchase defaulted debts for just a few cents on the dollar, so they may be motivated to recover at least something.
As mentioned on this Avvo thread, people have had some success negotiating settlements with debt collectors for 25-50% of the remaining Avant balance.
Just be sure to get any settlement agreement fully documented in writing before making a payment. Otherwise, the debt collector could claim you still owe the full amount.
3) See If You Qualify for Bankruptcy
For some people in extreme financial distress, bankruptcy may be the best option to get out from under a defaulted Avant loan and other overwhelming debts. Bankruptcy allows you to essentially hit the reset button and discharge (wipe out) certain types of unsecured debts.
That said, bankruptcy is a serious legal process with long-lasting credit implications of its own. It should only be considered as an absolute last resort after exhausting all other options for dealing with defaulted debts. You’d need to consult with a qualified bankruptcy lawyer to see if it’s a viable path for your specific situation.
How to Avoid Defaulting on Future Loans
Of course, the best way to deal with a defaulted loan is to do everything possible to prevent it from happening in the first place. If you do end up taking out another personal loan in the future (from Avant or elsewhere), here are some tips to stay on track:
Only Borrow What You Truly Need: Don’t be tempted by a larger loan amount than is absolutely necessary. Borrow only what you can realistically afford to pay back based on your current income and expenses.
Understand the Full Cost: In addition to the principal loan amount, be sure to factor in the total interest charges and any fees you’ll pay over the full term. Some personal loan lenders can have high APRs that make the true cost much more expensive.
Have a Repayment Plan: Before taking out the loan, map out a repayment strategy and make a budget to ensure the monthly payments will be manageable long-term. Setting up autopay can help avoid accidental missed payments.
Build an Emergency Fund: Aim to have at least 3-6 months’ worth of living expenses saved up in case of job loss or other financial hardship that could impact your ability to make loan payments.
Stay on Top of Your Finances: Regularly review your income, expenses, and outstanding debts. If you start to struggle, reach out to lenders proactively before missing payments. Good communication is key.
Only Use Loans for Meaningful Investments: Taking out a personal loan to pay off high-interest credit card debt can make sense. But avoid using loans for discretionary spending that won’t provide any return on investment.
Potential Legal Implications of Defaulting on Avant
While defaulting on an Avant personal loan doesn’t carry any direct criminal penalties, there are some potential civil legal implications to be aware of:
Debt Collection Harassment
The Fair Debt Collection Practices Act (FDCPA) prohibits third-party debt collectors from using abusive, deceptive, or unfair practices when trying to collect a debt from you. This includes rules like:
They can’t call you before 8am or after 9pm
They can’t threaten violence or harm against you
They can’t repeatedly use profane or obscene language
They can’t falsely threaten legal action they don’t actually intend to take
If an Avant debt collector oversteps these FDCPA boundaries and engages in harassment, you may be able to sue them in federal court to recover statutory damages.
-Potential Lawsuit Over the Debt
As mentioned earlier, Avant or the debt collector they sell your defaulted loan to does have the option to pursue legal action against you for the unpaid balance. If they sue you and get a court judgment, they could then pursue more aggressive collection tactics like:
Wage Garnishment: Getting a portion of your wages automatically deducted from your paycheck before you receive them.
Bank Account Levies: The debt collector can legally remove funds from your checking or savings account to pay the judgment.
Property Liens: They may be able to place a lien against your home, car, or other assets, making it difficult to sell or borrow against those assets until the lien is paid off.
So while you can’t go to jail over an unpaid Avant loan specifically, the legal judgments that creditors can obtain do have teeth in terms of collecting what’s owed.
Statute of Limitations on Debt Collection
It’s also important to understand the statute of limitations laws around debt collection in your state. These laws essentially put an expiration date on how long a creditor has to sue you over an unpaid debt.
For example, in New York the statute of limitations is 6 years from the date you defaulted or made your last payment on the debt. So if Avant waits longer than 6 years to take legal action, you may be able to avoid a lawsuit altogether based on that expired statute of limitations.
However, the statutes of limitation vary from 3-10 years depending on the state. And creditors can potentially “re-age” or reset that limitations clock through certain actions like getting you to re-affirm the debt or make a small payment. So it’s not a surefire protection, but understanding your state’s statute of limitations is important.
Alternatives to Avant Loans
If you’re looking for alternatives to Avant personal loans, either because you’ve defaulted and burned that bridge – or you simply want to explore other options, here are a few potential choices:
-Other Personal Loan Lenders
There are many other reputable online lenders that offer personal loans similar to Avant, including:
SoFi
Marcus by Goldman Sachs
LightStream
Upstart
Best Egg
Each lender has their own rates, fees, eligibility criteria, and loan amounts they offer. So shopping around and comparing multiple options is wise before choosing one.
Credit Unions
Credit unions are an often-overlooked source of personal loans that can offer lower rates and fees than big banks or online lenders. As a non-profit, credit unions are able to be more consumer-friendly with their loan pricing and terms.
The downside is that you typically need to be a member of a particular credit union to access their loan products. But it’s usually easy to qualify for membership through loose associations.
Home Equity Loans or Lines of Credit
If you’re a homeowner, tapping into your home equity can be a way to access funds at a relatively low interest rate. Home equity loans or lines of credit use your home as collateral, so the interest rates are much lower than unsecured personal loans.
Of course, using your home as collateral also means much higher risk if you default on repayment. So these options require careful consideration.
Cash-Out Refinance
Along similar lines, homeowners can access a chunk of cash by refinancing their existing mortgage for more than they currently owe, and taking the difference in cash. This is another way to leverage home equity at a low interest rate.
401(k) Loan
Those with a 401(k) retirement plan may be able to take out a short-term loan against the vested balance. These loans typically charge low interest rates and get repaid through payroll deductions over 5 years or less.
The risk here is that if you leave your job for any reason before fully repaying the 401(k) loan, the outstanding balance is considered a withdrawal subject to taxes and early withdrawal penalties.
Family Loan
Finally, borrowing money from a family member can be an option to avoid high interest rates and fees from institutional lenders. Just be sure to get any family loan agreement formalized in writing to protect that relationship.
The bottom line is that defaulting on an Avant loan can create a messy situation with serious financial consequences. But being proactive about your options, whether that’s negotiating with Avant, settling with debt collectors, or exploring alternative lending sources, can help mitigate the damage and get you back on track.