Disadvantages of late payment of instalments of loans?
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People who are managing their finances well can able to pay their bills on time and never have to face the disadvantage of late payments. On the other hand, there are many people out there who are cash strapped or make the excuse of forgetting about the due date could face the severe impact of making delays in the loan instalments.
Have you wonder what would happen if you delay the payment of instalment loans? One should better know the disadvantages of late payment of instalments of loans. Falling behind the due date of your loan payment can be easy but the consequences to be faced would turn out to be severe.
Some of the disadvantages of late payment of loan are as follows:
Leave you open to pay additional charges and penalties:
If you delay your loan instalment, you may have to pay the additional fees and penalty charges. Collection fees, unpaid interest and added charges would be added to your outstanding balance. In this way, your loan would become more expensive than you can think of. Many lenders provide the grace period before they charges the late fees. The grace period may be of 30 days or 45 days.
Drop your credit scores:
Entry of late payment could spoil your credit scores. Credit scores contain 35 percent of your payment history. If you make delays in the loan payment, it quickly reported to the three major credit agencies (Experian, Equifax, and TransUnion) and thus drops down your credit scores. Poor credit scores will let you lose the benefits that you may get with good financial credibility. Some of them are:
1. Limit the options to refinance a loan or get credit:
Most of the lenders may not allow you to refinance with the damaged credit scores. It turns out to be really hard for you to get any loan or credit if you made your loan payment more than 30 days late. Thus, making payments on time is essential as it could actually cost you much while applying for a loan or credit from the financial market.
2. Late payments affect the interest rates while refinancing:
Late payments could let you lose the points on your credit report. Thus, spoiled credit scores would charge you relatively higher rate of interest while applying for a loan or credit. Therefore, you may have to face the disadvantages of getting the help of loan at comparatively high rates then holding good credit scores.
3. Unable to rent an apartment or home:
You may lose the benefits of privileges that a responsible borrower can get. Most of the landlords are now have the right to look into your credit scores or payment history before making a decision to lend you his place. If you are already having difficulties in paying the borrowed money on time, he may not be interested in renting you his apartment or home.
Every lender follows the different terms. Therefore, it is important to call your lender to know about the actual consequences of making late payments.
Tips to avoid late payments:
Set up an automated bill payment on your loans that will automatically deduct the amount from your bank before the due date.
If you have delay the payment of loan, do your best to meet it within the grace period to avoid severe financial problems.
Before paying off your other debts, make your mortgage payment a priority to be met out.
If you think that you cannot make payment on time, quickly contact your lender before the due date.
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