Most individuals borrow money with the intention of repaying it. However, sometimes, life circumstances intervene and make repayment hard or impossible. Some of the common reasons why you might default on your loan payment include a loss of income, an unplanned car or house repair, an unexpected medical bill, or a family emergency. Regardless of the due date, it is important for you to know what to do when you miss a due date.
Although it is not the end of the world, failing to repay a loan can set off a series of events that can affect your ability to pay back your debt or obtain more easy cash loans in the future. To avoid this from happening, you should know what can happen and how to prevent missing another loan repayment. Read on to find out what is likely to happen if you miss a loan payment and the ways to avoid defaulting on a loan.
What happens if you miss a loan payment
– Late fees: One of the most common consequences of missing a loan payment is that you will incur a late fee. The amount of the fee will vary depending on a number of factors, such as your money lender, the kind of loan you have, the length of time when the payment remains outstanding, and your remaining balance. Some money lenders may offer a grace period, so it is best to look at your written agreement for details.
– Decreased credit score: Money lenders are authorised to report a missed loan payment to credit bureaus after a minimum of 30 days. This report can cause your credit score to be reduced. It may even continue to decrease if the balance stays unpaid for a long time. Nonetheless, depending on your money lender, they may decide to wait longer to report your missed payment or even not report it at all.
– Extra interest: For loans that come with daily simple interest, your payment schedule assumes that your monthly repayments will be made by the due date. So, if you are not able to make a loan payment on time, a bigger portion of your next payment will most likely be put toward interest. In other words, when you default on a loan payment, you should expect to pay extra interest.
How to avoid defaulting on a loan
– Contact your money lender immediately: The first thing that you should ideally do when you are not able to make a payment on time is to call your money lender and explain why you missed the due date. Your money lender may have options that can help you, such as allowing you to change your due date so that you can have a little more time. You may also avoid interest charges and late fees if you closely communicate with your money lender.
– Reassess your budget: If your expenses and income have changed recently, it is perhaps time to reevaluate your monthly budget. If you have never come up with a budget before, the process will provide you with significant insights into which areas of your budget can be cut back in order to meet all your payments every month. While this may not be a long-term solution, it can buy you some time.
– Look into debt consolidation: It would help to consider whether debt consolidation can assist you in obtaining a lower monthly payment, lower interest rate, or both. Debt consolidation loans in Singapore can help you get more favourable payoff terms and can convert many of your debts into a single loan payment, thereby streamlining the number of payments you need to make each month – these are just some of the reasons why you should consider consolidating your debts.
– Consider automatic payments: If you want a simplified and foolproof way to pay your loans on time, you should consider signing up for automatic loan payments. This payment method enables you to have funds from your savings or checking account automatically withdrawn when it is time to make a payment. Some money lenders may offer biweekly automatic payments and other frequencies.
Failing to repay your loan on time can cause significant damage to your credit score and can cause you to incur additional late fees and interest charges. Not only will this make it more challenging for you to obtain instant cash loans in the future, but it can also possibly result in higher interest rates on your next loans. For this reason, it is very important that you stay on top of all your loan payments by following the pieces of advice shared in this article.
If you are looking for a reliable money lender to offer you loans with favourable payoff terms, look no further than Orange Credit! We are a reputable licensed money lender that provides a multitude of loans with fast loan approval in Singapore, such as personal loans, payday loans, business loans, renovation loans, foreigner loans, and debt consolidation loans. Please feel free to reach out to us anytime for more information on our loan offers.