How to do damage control on a late loan payment?

Missing a loan repayment deadline is a concern for everyone right from a small business owner all the way up to a savvy entrepreneur. No one is spared from its wrath. Unexpected and unanticipated expenses rise and the business suffers losses. The customers don’t pay on time. External factors like weather and recession blow away the sales. And a consequence of it will be that you might not be able to repay your loan installment on time. The main thing to consider is that missed or late loan payments stay on your credit report for at least 6 to 7 years and that, honestly, is not a small time. Late payments can hurt your personal credit score and your business standing with the creditors. It can affect your overall credit health. Since your credit history is always looked at by the bankers and issuers, a long-standing history of paying bills on time will prove that you are a responsible and reliable borrower. A poor history of on-time payments can be of negative effect. So you should keep your record straight and always be on time.

If you find yourself in the problem because of the late loan payment, these are the damage control measures you need to adopt to bring the damage level down and get back on track.

  1. Communicate with the lender

In case you know that you are going to be late on a payment, then let the lender know before the payment deadline. A lot of lenders tend to avoid the lender which can prove to be costly in coming times. Keeping up with the lender can help you come up with a plan and avoid consequences such as penalty interest rate and damage to your credit score.

  1. Pay your bills on time

If you make a default in payment, then you should make sure you pay the future bills and credit balances on time. This will reduce your problems and even though your credit score won’t be substantially high, it won’t be low either.

  1. If you anticipate missing deadlines, consider refinancing

Missing a loan payment once in a blue moon is not too big a problem. But if it happens regularly, it is a sign that you can’t afford this loan. In this case, you should consider refinancing if you don’t want to miss any further payments. It has its own pros and cons that you should properly evaluate. You get lower monthly payments if you refinance when there are lower interest rates. You also get a longer period to spread out your payments. The refinancing fees is another concern as well. You may be charged a pre-payment penalty for refinancing your loan which could wipe off all your savings you get from lower monthly payments.

Selecting the right kind of finance can also be a key to this problem. The bottom line, thus, is that it’s not the end of the world to be late on one late payment but it’s definitely good to nip the problem in the bud to avoid it happening over and over again.

By | 2018-04-18T05:19:09+00:00 November 6th, 2017|Credit Score|0 Comments

About the Author:

Pulkit Jain is the founder of LegalRaasta – India's top portal for registration, trademark, return filing and loans. Pulkit is a veteran CA with over 10+ of experience.

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