Q: What will happen if I don't pay off my loan balance after an unsatisfactory gap insurance claim?
May 03, 2021

I was in an accident and had $300 left on my loan after insurance payouts. I submitted a claim to my gap insurance and they are only offering to pay $200. They say the difference is from a condition assessment that my insurance company made. Do I have to pay the remaining balance?

Answer provided by
Emily Maracle

“Yes, you do have to pay the remaining balance. Not paying the balance left on your loan after your gap insurance claim will have a significant impact on your credit. When you signed for your loan, you agreed to its terms and conditions.

Every loan has stipulations that relate to either late payments or non-payment. When you stop paying your loan, these clauses take effect. You could face fees, which will increase your balance due.

After a payment is late by 30 days, most lenders begin reporting the late or missed payments to the credit bureaus.

If you leave your balance unpaid long enough, your lender may also send your loan to collections. Both missed payments and accounts in collections have a negative impact on your credit score.

Even after the balance has been paid, the missed payments will stay on record with the credit bureaus. It can take years to improve your credit once this happens.

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