Definition
Past due describes a situation where a payment or performance of an obligation is overdue, meaning it has not been fulfilled by the specified due date. However, it is important to note that simply being past due does not immediately put the obligation in a state of default. Default typically occurs after a certain grace period or after additional attempts to collect the overdue amount have been unsuccessful.
Examples
Utility Bills: A utility bill that was due on the 15th of the month but remains unpaid on the 20th is considered past due. Service providers generally give a grace period before considering the account in default.
Credit Card Payments: If a credit card payment is due on the 10th of the month and it is now the 15th without payment being made, the account is past due. Late fees may apply, but the account is not necessarily in default unless it remains unpaid for an extended period, such as 30 days.
Loan Installments: A loan installment payment due on the 1st but unpaid by the 5th is past due. The lender may initiate reminder notices or charge penalties but will not classify the borrower as in default immediately.
Frequently Asked Questions (FAQs)
1. What happens when a payment is past due?
When a payment is past due, the debtor usually incurs late fees or penalties, and receives reminder notices from the creditor. Continued delinquency may lead to a default status, which can result in more severe consequences.
2. How is ‘past due’ different from ‘default’?
An obligation is past due if it has not been fulfilled by its due date but has not yet reached the point of default. Default typically means the creditor has taken formal action after an extended period of non-payment, which may involve legal steps or damage to credit scores.
3. Can being past due affect my credit score?
Yes, being past due can affect your credit score. If payments are reported to credit bureaus as late, it can negatively impact your credit history and score.
4. Is there any grace period for past due payments?
Many creditors offer a grace period during which no penalties are applied beyond the due date. The length and terms of the grace period vary by creditor and agreement.
5. Can a past due account be restored to good standing?
Yes, once the past due payment is made, the account can often be restored to good standing, although late fees might not be waived.
Related Terms
- Default: The failure to meet the legal obligations (or conditions) of a loan, typically after a certain period of the debt remaining past due.
- Grace Period: A set amount of time beyond the due date during which a payment can be made without the borrower facing penalties or being considered in default.
- Late Fee: A charge incurred by a debtor for not making a payment by its due date.
- Credit Score: A numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual.
Online Resources
Suggested Books for Further Studies
- “Credit Repair Kit for Dummies” by Steve Bucci
- “Your Score: An Insider’s Secrets to Understanding, Controlling, and Protecting Your Credit Score” by Anthony Davenport & Matthew Rudy
- “Personal Finance For Dummies” by Eric Tyson
Fundamentals of Past Due: Finance Basics Quiz
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