Late Payments

There may come a time when you make a late payment on your loan, or may even miss a payment for that month completely. Missing or making late payments on a loan or credit card is unfortunately becoming common practice these days, with more people than ever before struggling to honour their monthly financial commitments.

The recession and credit crunch has thrown many individuals into a financial rut.  When this situation occurs, failure to make repayments becomes much more commonplace.

Most of us have, at one point or another, may have made a late payment because it was simply overlooked, but what if you cannot make payments due to lack of finances? Missing one payment won't do much harm to you now, but it might affect your credit record for at least a couple of months or even years.  If late or missed payments become a regular occurrence, lenders may not be as accepting. In fact, most will not consider you if you have a bad credit record. Individuals who continue to miss payments risk completely damaging their credit record, which in turn may take years to clear. And a bad credit record could mean getting rejected for future credit or loans. Some lenders may still accept you, but they will offer higher interest rates as you are a high risk client.

If you were late or missed payments, evidence of this may stay on your record for up to 36 months. More severe defaults will stay longer on your record, like county court judgments (CCJ's), bankruptcy and defaults on accounts. These could stay on your record for as long as 6 years.

Keeping your credit clean and clear is important, and one way to do this is to make sure you keep up with your payments. A clear credit record could also make or break any possible job opportunities. Some companies check their prospective employee’s credit record, and any discrepancies could hamper your chances of getting the job. This is especially true in financial institutions.

If you miss payments on your mortgage, lenders will be wary of you as mortgages are usually paid through a direct debit and are significantly larger than most other loans or credit payments. If your mortgage remains unpaid, this means that there was not sufficient money in your bank account and that could mean serious financial problems on your part.

Generally, individuals should really have no excuse for not realising that there is not sufficient money in their bank accounts, especially since it is so easy to access your account online. A good idea would be to set up direct debits on your loans. This will allow your payments to be made automatically on the same date every month. In this way you can plan in advance.

However, in most cases, financial problems only arise in times of tragedy and loss, like a divorce, sudden illness, retrenchment, job loss, or bereavement. If unexpected circumstances like these do arise, do not panic - simply contact your lender to make alternative arrangements. Lenders are usually very sympathetic and understanding, especially if you have been a diligent customer up to this point. Lenders may offer you alternatives, advice, and may even accept reduced monthly payments.

The best thing you can do if you find yourself in a tricky financial situation is contact your credit providers and honestly explain your problems to them. In this way you will not only clear your name, but your conscience as well.