What is the difference between a late payment and a missed payment?

The US is a country swamped in household debt. A report from the Federal Reserve of New York from May announced the total debt standing at $17.05 trilion, $2.9 trillion higher than before the covid-19 pandemic.

Constant increases should be a worry for families trying to deal with inflation as well as hiked interest rates increasing the costs of repayment.

Payments getting too much means payments being missed. There are important differences between a late payment, usually temporary effects, and missed payments, which could have much more serious consequences.

The difference between a late payment and a missed payment

A late payment occurs when you make a payment after the due date, but it is still within a grace period specified by the creditor or lender. Most creditors provide a grace period, which is a set number of days after the due date during which you can make a payment without incurring a late fee or negative impact on your credit report.

Late payments might still affect your credit score if reported to credit bureaus, but they are generally considered less severe than missed payments.

A missed payment, on the other hand, occurs when you fail to make a required payment by the due date and do not make the payment within the grace period. This typically results in more severe consequences than a simple late payment. Missed payments can lead to late fees, higher interest rates, and negative impacts on your credit score.

These negative effects can linger on your credit report for several years and may affect your ability to qualify for loans, credit cards, or favorable interest rates in the future.