When you do not pay a loan by the due date, your lender will often charge you late fees and report the payment as late to the credit bureaus. However, some loans have a built-in grace period that helps you avoid the late fees and credit score damage that would result from missing a payment.
General Definition
A grace period is a time during which a borrower can fail to make payments on a loan without being penalized. The length of the grace period varies from one loan to another and can last anywhere from one day to nine months. You can find your grace period on the loan promissory note or by calling your lender.
Student Loan Grace Period
Federal student loans all have a grace period of at least six months between when a student exits school and when the first loan payment is due. This grace period gives former students time to find a job and get their finances in order before having to make payments. Some federal student loans offer grace periods after deferment, as well. Private student loans do not always have grace periods, so students should check with their lenders to find out when the first payment will be due.
Monthly Grace Periods
Many loans, including student loans, offer a short grace period each month between the due date and the date on which the payment is recorded as late. Therefore, if you make a monthly payment during the grace period, you will not have to pay any late fees and your credit report will not show a late payment. However, if your loan charges interest based on how many days have elapsed since the previous payment, more of the payment will go toward interest if you pay during the grace period than if you pay on time.
Considerations
If possible, you should make your loan payments by the due date, even if you have a grace period. That way, you will still have the grace period as a buffer if you happen to forget a payment. Even if your loan does not have an official grace period, you might be able to avoid a late fee by calling your lender as soon as you notice you missed a payment due date. Especially if you have historically paid on time every month, the lender will often waive the fee for a late payment if you call within a few days and make the payment then.
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