When you’re under financial strain, it’s easy to fall in the trap of skipping your payments thinking you’ll cover them next time. But the truth is there’s no guarantee that your next time will be different from your current. So, by postponing your payments you might be sabotaging yourself. Here’s why:
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1. Your credit score will take a dip
The greatest factor that impacts your credit score is a default or missed payment, even if it’s one account or part of the repayment, says Afua Dakour, account manager at Intelligent Debt Management.
According to a credit solutions provider, Kudough, if you don’t pay your account within 30 days, you could lose a significant number of your 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 have to be put in place, says Dakour.
If there’s a missed payment for any insurance policy, that policy is at risk of not being fulfilled when a claim is put in place. A claim can be rejected if the policy is not up to date in terms of payments.
3. Your outstanding debt will increase
Every time you make a repayment on a store card or personal loan, for example, it affects two parts – the capital and the interest, says Dakour.
Therefore, if you don’t make a payment for one month, your outstanding amount will not reduce by this amount.
Since interest is a percentage of the outstanding debt, you’ll now be charged more for interest the month after your missed payment. For instance, you’ll be charged 28% of R5000 instead of 28% of R4700.
4. You’ll double your payment
If you skip your payment this month, you’ll pay twice as much in the following month. Your creditors will deduct the payment that was due last month coupled with the one that is due in the current one.
Make sure all your credit cards are up to date, that there are no missed payments on your store cards and that your personal loan repayments are up to date, advises Dakour.
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 your necessities.
You can also speak to a financial adviser who can help you come up with methods that help you pay your debt faster.
READ MORE: Do you want to settle your debt?
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 in a tight corner.
If you feel overwhelmed by your debt, it’s time to consult a debt counsellor who’ll assess your financial situation and draw up a new repayment plan that will give you the relief you need.
Justmoney can link you up with one of the trusted debt counsellors in the country. If you’re interested, fill in this form and a consultant will get in touch.