What Happens When I Skip A Debt Payment?
Top 3 reasons why you should never skip a payment.
When you’re straining under the burden of debt, it’s easy to think that by skipping a payment today or paying less than usual tomorrow, you can make up for it later.
Unfortunately, unforeseen future expenses and delays in repayment often materialise to prevent households from making headway against their debt.
Points will be deducted from your credit score
The highest impact on your credit score comes from missed or overdue payments, whether it’s one account or piece of multiple loans. For example, let’s say you miss a payment for an account that is 80% of your total credit score. Your credit score will definitely drastically fall, as a result.
Risk of policy claim rejection
It depends on the provider, but if a policy payment is missed, it is very likely that a new payment plan will need to be put into place. If there is a missed payment for any insurance policy, that policy can become invalid and cancelled.
Overall debt increase
When you only make the minimum payment every month, it is considered a good start. These payments help lower your outstanding debt, but may or may not cover all of the interest that has accrued on your account. If you do not make a payment at all for one month, you are charged interest on your missed payment even though it does not count for outstanding debt. For example, if an individual has R5 000 owing on their account, they would normally pay interest of 28% on nonexistent R900 in personal finance lingo. If the individual did not make a payment at all during the month in question, both the R900 and additional R2 300 in interest were added to their account balance bringing them to R7 300 in just one month!
With the use of debit orders, it’s easier to ensure your bills and invoices are easily paid up on time. For more information on how to stay up to date with your debit order payments, contact Credit Health.