When you’re under financial strain, it’s tempting to think that you can skip your payments today and make up for it tomorrow. But the truth is, there’s no guarantee that tomorrow will be any easier financially.
As a result, postponing your payments may be self-sabotaging. We reached out to experts to find out what the consequences could be.
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1. Your credit score will take a dip
The factor that most impacts your credit score is a default or missed payment, even if it’s one account or part of the repayment, says Afua Darko, account manager at Intelligent Debt Management.
If you don’t pay your account within 30 days, you could lose a significant number of credit score points.
2. Your insurance claims could be rejected
When a policy payment is missed, depending on the service provider, a new payment plan will likely be put in place, Darko notes. Irrespective, when payments are missed, the policy is at risk of not being fulfilled when a claim is submitted. In short, your claim will not be paid.
3. Your outstanding debt will increase
Every time you make a repayment on a credit account, such as a store card or a personal loan, it affects two parts of the loan, the capital and the interest, says Darko. If you fail to make a payment, your outstanding balance will not decrease.
Since interest is calculated as a percentage of the outstanding debt, you’ll be charged for additional interest in the following period. For instance, you might be charged 28% of R5,000, instead of 28% of R4,700.
4. You’ll face a double-payment deduction
If you skip your payment this month, you’ll pay twice as much the following month. Your creditors will deduct the payment that was due last month, coupled with the one that is currently due.
If you find yourself struggling with your debt, the first thing you should do is review your expenditure. Reduce your spending and make sure you prioritise necessities, Darko advises.
You can also speak to a financial adviser who can help you identify methods to help you pay your debt faster.
You should always have money stashed away in case of emergencies. These savings could help you ensure that you’re not behind with your payments, should you find yourself financially squeezed.
If you are overwhelmed by your debt, it’s best to consult a debt counsellor who’ll assess your financial situation, and draw up a new repayment plan to give you the financial relief you need.