What happens if I default on a loan in Canada?

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Default timeline Days Late What Happens --- --- 1–30 Late fee applied; possible courtesy call 30–60 Reported to credit bureaus; score drops 50–100 points 60–90 Account flagged delinquent; lender may raise rate or cut other limits 90–120 Collections department contact begins 120–180 Sent to third-party collections; charge-off processed 180+ Legal action possible; debt sold to collections agency Secured loan consequences Loan Type Consequence Typical Timeline --- --- --- Auto loan Vehicle repossessed 1–2 missed payments Mortgage Power of sale or foreclosure 3–12 months (varies by province) Equipment loan Equipment seized 60–120 days HELOC Home foreclosure possible 3–12 months Long-term credit impact - Default stays on credit report for 6 years (7 in some provinces) - Future borrowing becomes significantly harder and more expensive - May affect employment in finance, government, or roles requiring bonding - Can result in wage garnishment if a court judgment is obtained - Can affect rental applications If you're struggling — act early 1. Contact your lender immediately — many offer hardship programs (deferred payments, modified terms) that don't damage your credit 2. Speak with a non-profit credit counsellor (Credit Counselling Canada — free in most provinces) 3. Consider a consumer proposal through a Licensed Insolvency Trustee (LIT) — settles unsecured debt at 30%–70% of face value 4. Bankruptcy as last resort — provides legal protection but stays 6–14 years on credit Provincial foreclosure rules differ - Ontario, BC, Alberta: Power of sale (faster — 90–180 days) - Quebec, Manitoba, Saskatchewan, Nova Scotia: Judicial foreclosure (slower — 6–12+ months)

What happens if I default on a loan in Canada?

Default timeline

Secured loan consequences

Long-term credit impact

If you're struggling — act early

Provincial foreclosure rules differ

Sources

Related resources

Days Late	What Happens
1–30	Late fee applied; possible courtesy call
30–60	Reported to credit bureaus; score drops 50–100 points
60–90	Account flagged delinquent; lender may raise rate or cut other limits
90–120	Collections department contact begins
120–180	Sent to third-party collections; charge-off processed
180+	Legal action possible; debt sold to collections agency

Loan Type	Consequence	Typical Timeline
Auto loan	Vehicle repossessed	1–2 missed payments
Mortgage	Power of sale or foreclosure	3–12 months (varies by province)
Equipment loan	Equipment seized	60–120 days
HELOC	Home foreclosure possible	3–12 months