When Todd Christensen was in college, he struggled to afford the $50 minimum payment on his first credit card—which he’d maxed out in less than 36 hours, to the tune of $2,000. His finance-major roommate suggested that if Christensen sent a partial payment, even just a couple of dollars, the credit card company couldn’t report his account as late or sue him in court.
Today, Christensen knows that advice is not exactly sound, as he’s the education manager at Idaho-based Money Fit by DRS, a nonprofit debt management agency. The reality of this scenario is that your lender may not even consider the partial payment as any kind of payment, which could lead to further financial fallout.
In this article, we’ll consider how partial payments can help—or hurt—when paying off your debts. In many cases, a partial payment is seen as no better than a missed payment by creditors, so it may not be worth making the effort.
Do Partial Payments Help?
“Generally, you should expect that partial payments do not meet creditor payment requirements,” Christensen told The Balance by email.
A partial payment is any payment smaller than the minimum amount due, as specified by the creditor. If you don’t make the full payment within 30 days, the creditor reports to the credit bureaus that your account is 30 days late. This negative report generally remains on your credit history for seven years.
If you only make partial payments, you may wind up eventually owing thousands of dollars to your creditor, which could sue you in court for breaking your original agreement. If they win, they’ll likely pursue wage garnishment with your employer, Christensen said.
Consequences of Partial Payments
Mailing or e-sending in less than what you owe can result in a host of issues, ranging from decreased credit scores to jail time, depending on who you owe money to. We’ll examine both standard creditors and some not-so-standard creditors, such as your utilities provider.
If you attempt to pay your loan servicer with only a partial amount of your mortgage payment, the servicer isn’t required to credit your account, according to the Federal Trade Commission (FTC). The servicer may hold the payment until you can come up with the rest of your monthly amount, or return your payment.
If your payment arrives at the lender, further bad news ensues. Your late or missing payment could lead to late fees, credit score damage, default, and, eventually, foreclosure.
If you contact your servicer, you may be able to qualify for a lower payment through a temporary payment reduction or suspension, along with loan modification or a repayment plan.
Paying less than the minimum due amount to a credit card company can leave you with a bill full of late fees, and possibly even a higher interest rate on future purchases resulting from a penalty annual percentage rate (APR).
If you work out a partial payment with your credit card company, it may be reported as such with credit bureaus and show up on your credit report. Nonprofit debt management organizations could negotiate a debt repayment plan between you and credit card companies featuring payments recorded as full payments—although you are in fact paying a lower amount.
Both options could lead to events that decrease your credit score but could be a better alternative to the compounding disaster of late or missing payments, high interest, and late-fee charges.
How your partial payment is viewed depends upon the auto lender and your contract. However, Christensen said that many states give the lender the right to take back or repossess the vehicle as soon as the day after you don’t make the full payment.
Read your contract to understand what might happen if you don’t make your payment on time—as you probably won’t be given any warning before repossession occurs.
If you’re one day late making a payment on your student loan balance, your account becomes delinquent—and remains so until you pay off the balance or make another payment arrangement with your loan servicer. For example, you could arrange for forbearance, deferment, or request a change to a more budget-friendly repayment plan.
However, you do have 90 days to clean up the situation, which is more than many other creditors offer. If you’re still delinquent on your student loan 90 days or more later, that delinquency is reported to the three credit bureaus. If your account remains delinquent, you could fall into default, which comes with a host of harmful consequences, including legal action by your lender, and loss of eligibility for more student aid or a repayment plan.
If you make a partial payment without speaking to your lender, you could get hit with a late fee. The lender may not accept the payment, or will consider the amount that goes unpaid “past due,” as with a credit card. Speak with your lender to find a solution instead.
If you don’t pay owed federal taxes on time, interest and late-payment penalties could pile up. In a worst-case scenario, the IRS can file a legal claim against your property, which can impact your credit. Meanwhile, the penalties, fees, and interest continue adding up.
The IRS does offer a short-term payment plan if you think you can pay off the whole amount—which must be under $100,000, including the owed taxes, interest, and penalties—in 120 days or fewer.
Longer-term installment plans are also available, but have heftier setup fees that can run between $43 to $225. These plans are available for those owing $50,000 or less and require monthly payments by check, electronically, or through auto-deductions. With both programs, you’ll still pay accrued penalties and interest until you’ve eliminated the debt.
You might be able to send in partial payment for any state, county, or city property taxes. But depending upon the debt, your payment might first go toward interest, fees, or other charges. And the unpaid balance could lead to further penalties.
Whether partial payments are accepted depends upon the agency—some will just mail back or otherwise reject your partial payment.
If you can’t pay your full child support, a partial payment may help demonstrate that you’re making an effort. However, you’ll want to do it in concert with contacting whoever handles your child support. If your employment situation has changed, for example, you might ask for a review of your child support case.
If you don’t pay your child support in full, consequences can range from interest charges on the unpaid balance to federal charges for a criminal felony, including jail time.
In the case of medical bills, each provider will have a unique payment policy you should read through before attempting to make a partial payment. Some won’t accept anything less than the full amount unless you negotiated in advance. If you don’t pay your bill, it could be sent to a collections agency, which will then report your debt to the credit bureaus. The collection action could remain on your report for up to seven years.
Some bureaus may not display medical collections until they’re 180 days past due to give you time to work out a payment.
For some utility bills, you may be able to make partial payments, but interest could accrue on the unpaid balance. Before making a partial payment, contact your water, electricity, or other utility company, as it could put you on a repayment plan or otherwise adjust your charges. In some cases—such as telecommunications—your partial payment might keep your internet service on, but not your cable, or vice versa.
And, of course, if you don’t pay your utility bills, you may face a sudden shut-off.
A collection service might not accept a partial payment unless you prearranged that payment with a collections agent. And if the partial payment is not accepted, a debt collection agency could sue. If the agency wins, the court judgment can lead to wage or bank account garnishment, or a lien against your property.
Although any creditor may tell you ahead of time that they’ll accept a partial payment, they could choose to report your payment as late (usually from 30 to 90 days past due) and/or increase your interest rate, Christensen pointed out. With this in mind, get your arrangement with the creditor in writing. A creditor might also accept partial payment in exchange for canceling or otherwise settling the debt. If this is the case, you’ll want to retain evidence that you both agreed to the settlement and paid what you agreed to pay.
What to Do If You Can’t Pay in Full
If you’re unable to come up with the full payment due, here are three steps Christensen suggested:
- Find additional cash by cutting unnecessary household expenses or taking on a side gig.
- Reach out to your creditor before the payment is due to explain your situation and what you can afford. Then, ask about a “hardship repayment plan.” Plans vary by creditor, but could offer the option of minimal or no payment, a temporary reduction or suspension in account interest, or interest-only payments. Some programs last a month, and others up to six months or so.
- Consider a nonprofit credit counseling agency, which can negotiate lower interest rates with your current creditors. This usually produces lower monthly payments.
If you work out a plan, the payment you make is no longer counted as a “partial payment,” but rather an agreed-upon amount, Christensen said.
Remember, often a partial payment is viewed the same as a missed payment by creditors, so it may not be worthwhile to make one.