Payment history is one of the critical aspects that helps a lender decides the amount to loan you. It entails things like- payment dates on the due loans, the amount you pay every month, and bill payments. It also reveals the relationship with your previous lender.
Missed payments and an imbalanced structure may appear as a red flag to the lenders. Whether you are just 3 or 30 days late, it impacts your credit score and chances to qualify for low-interest rates.
How do late payments on a small loan affect your credit score?
The consequences of delaying a payment may invite costs like- late payment fees, missed payment fees, and other charges. The specific costs on small loans may vary as per lender-to-lender but may ruin your credit score.
Lenders generally send reminders before the due payment date. It helps one prepare and save the repayment money. The situation gets intense when one misses 4-5 payments in a row. As per a source, if you miss a third payment, your credit score slashes by 30%.
Missing payments on short-term loans raise the interest costs and associated fees making it costly. The lender sends constant emails stating the dues. He may issue a CCJ if you do not reply or acquaint him with the existing financial situation.
It is the worst scenario to face. With CCJ proceeds the legal scrutiny and it further impacts the credit score. A CCJ remains for up to 6 years on your credit report even if you clear the dues. You can only inform the agencies about the clearance. They may revise the credit report accordingly.
With a low credit score, you may miss some economic loans for lifestyle goals.
Can I remove the late payment from a credit report?
Yes, you can request removal on late payment if there is delinquency. You can add a notice of correction to your report. Lenders often ignore you if you have requested clearance of pending payments. If you believe that you have no previous debt history but one of those stays on your credit file, you can dispute a late payment on your credit report by asking the lender to rectify it quickly.
You can submit one copy to credit bureaus for a detailed analysis and amendment. If they dispute an error in the lender’s task, they will provide an updated report by removing the delinquencies. Reporting and removing errors from credit files can boost your credit score incredibly.
8 ways to avoid missed payments’ impact on credit score
Late payments reveal the borrower’s casual note on financial management. It may be a complete turn-off for the other lender you seek a loan from. You may appear as a risky borrower and hence they may deny the loan. If you have missed some payments recently, you can take the below actions:
- Arrange a new repayment plan
- Analyse the possibilities of a payment holiday
- Try to pay half the amount atleast
However, if you have just taken a loan but are afraid of missing a payment, the below options may help you.
1) Set up reminders for due payments
One of the causes of missing a payment is- neglect. Most individuals forget the payments due to too many engagements at work and personal sphere. Late payments attract hefty penalties. A wiser move would be to set up reminders and mark the payment dates on the calendar.
If you want to avoid the hassle of marking and remembering dates, opt for direct debits. It helps ensure regular payments on the due date with automatic payment deductions. It is easier for the one with a handsome income and low liabilities.
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2) Change the payment due dates
Sometimes finances do not work as planned. Well, it may seem insane, but check whether you can re-schedule all your short loan payments on a single day or not. If yes, you can eliminate the hassle of budgeting for the next payment in series every month. It also keeps your credit score in good shape. It is ideal for individuals with good disposable income.
If the idea is unsuitable for your finances, plan the dates per the repayment budget. Choose and change the date if you believe you may miss a payment or two. Act early; the lender may impose penalties if you miss a payment. The idea may be suitable for low-income individuals or the unemployed.
3) Check whether you have a grace period
The grace period is the flexibility that a lender offers a borrower to pay a loan payment. He grants some additional days to clear the dues. Identify whether your lender provides you with one or not. It may help you avoid exhausting costs and pay comfortably. Usually, one gets a grace period of 30 days on loans. After that, the lender may take legal action by sending warning letters to the borrower.
4) Consolidate high-interest debts in your profile
If you want to prevent your credit score from the fall, consolidate some small loans if possible. Debt consolidation helps get a better hold over the finances but releases additional debt burden. You may qualify for affordable interest rates if you lack too many debts.
By doing so, you can use the released money to pay the dues to your lender. The lender you partner with for debt consolidation pays the dues to individual lenders. It helps you pay the loan amount timely. Be mindful of the eligibility criteria and the provision of the same. It may not work for every financial situation or circumstance. Consult an expert to know your choices better.
Whenever you apply for online loans in the Ireland marketplace, research options. Identify the income, expenses, and debt payments before taking up a loan. Late payments affect your credit score but halt your dreams to rent an apartment. You may find it hard to qualify for credit cards with low credit. Thus, consolidating some debts may improve your future loan prospects and help you avoid late payment blues.
Bottom line
Late payments on any loan can have a ripple effect. It may affect other timely bill payments like- utility and subscription payments. If you have 2 debts with the same lender and pay only one, it may impact your credit score. The lender may report it to credit bureaus.
To avoid such circumstances, follow the above ways to manage loan payments timely. By doing so, you can climb up the lifestyle ladder seamlessly.
