Making your payments on time can improve your credit score. Despite this, the delinquency rates for mortgage loans, auto loans, and credit card repayments increased in the last quarter of 2022. US consumers now owe a record $31.5 trillion in debt and these missed payments are adding to this figure. So, let’s find out how to stop delinquent payments once and for all.
Automate your payments
When a payment is one day late, it becomes delinquent. At this point, the lender could add a late payment charge to your bill. The late fee that you’ll have to pay will depend on the figure stated in the contract you signed when you first borrowed the money. 1.5% to 5% is typical. The average auto loan for a new vehicle is $716 per month. So, if you’re hit with a late charge of 4%, you’ll have to pay an extra $28. You can see how this can soon add up if you’re delinquent on several occasions. You can avoid these charges by automating your payments. On your online account, set up a recurring payment to the lender for the same date each month. The money will then be moved from your account and passed on without you even having to think about it.
Keep your account in the black
While most checking accounts include an overdraft, you can say no to the service. This is ideal for keeping your finances on track and ensuring you only spend what you can afford. A downside is that if there’s not enough cash in your account, a crucial payment could be delinquent. Regularly checking your account is a must. You should also top it up as and when needed. This could be with money from another account or from a secured loan you’ve taken out. Borrowing money against your home’s value will give you a large chunk of cash. It will be granted based on the equity you have and your credit score. Look for one with an interest rate of around 6.5% to get the best deal. You can use the money for things such as paying off debts or buying a car outright. You can then get rid of your auto loan and won’t have to worry about delinquent payments.
Make the minimum payment
The cost of living is rising and many consumers are prioritizing the things they spend their money on. It’s never a good idea to skip a payment altogether as this will impact your credit score and long-term financial health. Many lenders give the option of paying the full amount or a minimum amount. Always make the minimum payment as this will prevent delinquent payment. You’ll then have more time to get to grips with your finances and catch up with what you owe.
Plan your budget
73% of Americans say they don’t budget. This is a risky move as not budgeting can lead to overspending. Then, when the time comes to pay a bill, there’s no money left to pay it. This is when a delinquent payment is most likely to happen. It’s worth going through your finances at the start of each month and planning how the money you’ve got will be spent. By doing this you can be confident that you’ve got the cash to pay all your essential bills, including those that could give you a delinquent payment if they were missed. If you’ve got some spare cash at the end of the month and you’re satisfied everything has been paid off, you can splash out on some luxury items, such as a takeout.
Set reminders
37% of people who have missed a credit card payment say that forgetfulness was the cause. It’s so easy for life to get in the way, an illness to rear its head, or a family emergency to occur, and this is when you’re most at risk of a delinquent payment. The best thing you can do is set reminders to pay what you owe. You may also want to set a reminder for a few days after to check that the payment was successfully received by the organization. You could do something as simple as write down the payment due date on a calendar. But, bill reminder and finance organization apps are a lot better for people who are on the go.
Consolidate debt
Do you have debt with multiple companies? If so, the last thing you want to do is miss a payment with one or more of them. However, you’re more likely to miss a payment when you’ve got multiple ones to make. Consolidating your debts is beneficial for many reasons. First of all, you may be able to secure a better interest rate. Less interest means you don’t have to pay so much to the company, so you’ll be less likely to get a delinquent payment. Consolidating debt also means you’ll only have one payment to make. This is preferential as you’re less likely to forget about it.
Request a payment holiday
If you’ve unexpectedly lost your job, have been hit with a large medical bill, or have had another financial emergency, speak to the companies you owe money to. Let them know that you won’t be able to make your next payment with them and see if there’s anything they can do to help you out. It’s much better to be open and honest with them before the delinquent payment occurs. Some companies, particularly mortgage lenders, have payment holidays in place. These allow you to take a break from paying your mortgage for a few months while you get back on your feet. Important things to note are that you’ll continue to incur interest during your holiday and when your payments are reinstated they’ll be higher than they were before your holiday. However, they can still be beneficial as your credit report won’t show a delinquent payment.
Delinquent payments happen for many reasons, including forgetting to pay. But the risks of delinquent payments are detrimental to your personal finances, so follow this advice to stop them from happening to you.