Delayed payments have a negative impact on more than just your credit score

#ConsumerEducation

#FinancialAwareness

Jawad was happy to buy everything he needed for his new house in a single shopping spree. However, he forgot that he needs to make monthly payments to pay off the finance on the items he bought. When he got alerts on minimum dues he needed to pay on his card, he just paid that and forgot about the remaining amount. He tends to push away any notifications that he receives about making payments, with the belief that he will get to them when he has the time. Research shows that 16% of consumers tend to miss payments of instalments that are due. But why should you not miss payments?

1. You will pay a penalty: Most delayed payments come with a penalty, which is added to your next bill. So you end up paying more than you would have if you had paid on time.

You can set up auto-debit to ensure that you don’t miss a payment.

2. You will be a defaulter: Every missed payment is considered a default. Depending on the time that has passed since the last payment, your debt might end up being labelled as a default, affecting your chances of ever getting finance again.

If you miss a payment, get back on track quickly and stay current on your repayments.

3. Your credit score will suffer: Missed payments – of utility bills, repayments, and others – appear on your credit history even years later. If, in future, you actually need finance, this will have a negative impact.

Increasing your credit score, which has been affected by delayed payments, can take more than six months.

4. Your budget will go off track: Jawad had a tough time keeping track of which payments he had missed and what he actually needed to set aside for repayments each month. After missing two payments in a row, his planned budget has gone off the rails and he may need another finance to pay off the current ones.

Plan ahead. Always know how much you will need in the months to come and set aside money for repayments.

5. You will face financial stress: Missed payments become such a burden that consumers sometimes throw away account statements without opening them. Financial stress can cause other problems, affecting relationships and job performance. You might face legal action if the financial institution classifies your case as ‘bad debt’.

Stay updated on your payments for better sleep every night.

Using digital tools for financial management can save you time and effort in making and tracking payments.