Even though this isn’t ideal, it could happen that your personal loan repayments are not made on time. What could this mean to your financial health?
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First, you need to understand the differences between missed payments and credit grantors. How long it takes for you to pay the loan back after the due date will play a major role.
Customers are usually allowed to make up the missed payment within a grace period. Credit grantors generally allow for up to 14 days before they can record it on their credit report.
According to Equifax, a refund can be made:
- Between 14 and 60 days after due date, a latepayment will be made.
- fault occurs if the due date is missed more than 60 calendar days.
Chances are that you will face consequences, regardless of whether you miss your loan repayment due to inability to pay it back or forgot about transferring funds on time. These consequences could include:
There may be late fees
Many lenders will charge you a standard missed payments penalty for any late repayments. These fees are charged for missed payments of any kind, even those that are resolved within a day or so.
Although the exact amount of late fees you could be subject to for not paying a payment varies from one lender to the next, the average late fee on RateCity for personal and car loans is $ 22. $ 14. Comparatively, the average late fee for credit cards on RateCity is $ 20.58. These averages do NOT include products with $ zero late payment fees. For a more accurate figure, contact your personal lender.
Keep in mind that a default charge is not always a one time fee. You may be charged additional late fees if you don’t pay the invoice within the time limit.
You could be charged additional interest
You will be charged additional interest if you miss a payment. This can increase your total interest on your loan.
Credit score can suffer.
Your credit report may be affected if your missed payment is not paid within 14 days of the due date. A late payment, which is made between 14 and 60 calendar days after the due dates, may be added to your credit file.
Equifax says that “it’s unlikely” that a single late payment combined with an on-time payment will have a significant impact upon your credit score. It is possible that this information may still be stored in your credit file and could affect the outcome of any future credit applications. Your repayment history plays an important role in the decision making process of lenders.
A missed payment that isn’t paid by the due date or for more than 60 calendar days will be considered a default. It will appear on your credit reports as a default. This could have a detrimental effect on your credit score. A default is not like a late payment. It will only be recorded on the credit report if you miss a payment of more than $150, but it could remain there for as long five years due its severity.
What do I do when I know that I will not be able to pay my bill?
You should contact your credit provider if you are having financial difficulties and cannot afford to pay off a personal loan. They might be able offer financial help, such a repayment plan or an extension.
It is important to get in touch as quickly as possible with your lender and make an agreement. This will prevent you from having a missed repayment recorded on credit reports. You should also consider the reasons behind your late payment as lenders may have specific criteria.
The national debt helpline can provide free financial advice.
You can also visit the RateCity Credit Score Center if you have ever missed a payment and it has been noted on your credit report. This will give you ideas on how to improve your credit score.