The term delinquency has two primary, distinct meanings in different contexts: one in law and criminology (specifically regarding minors) and another in finance.
Delinquency in Finance
In the context of finance, delinquency refers to an individual or entity failing to meet a financial obligation on time.
Financial delinquency is the state of being late or past due on a payment for a debt or financial obligation. An account is generally considered delinquent as soon as a payment is missed on the due date.
Types of financial delinquency include:
- Loan Delinquency: Missing scheduled payments on loans such as mortgages, auto loans, personal loans, or student loans.
- Credit Card Delinquency: Failing to make the minimum required payment on a credit card by the due date.
- Tax Delinquency: Being late in paying taxes owed to a government authority.
Consequences of Financial Delinquency:
- Late Fees and Penalties: Immediate charges added to the outstanding balance.
- Credit Score Damage: Delinquency, especially after 30 days past due, is reported to credit bureaus and can significantly lower the borrower’s credit score for up to seven years.
- Higher Interest Rates: Some creditors may impose a penalty Annual Percentage Rate (APR).
- Escalation to Default: If delinquency persists for a long period (often 90 to 270 days, depending on the debt), the account can enter default. This can lead to foreclosure (for mortgages), repossession (for auto loans), or the debt being sent to a collections agency.