December is finally here and for many it is a sigh of relief, as they are able to spend much needed quality time with their family and friends. However, on the minds of most consumers, it presents another challenge. That of not having enough money to make it through December. Almost 80% of South Africans currently rely on loans to get them through the year. With December being here, many are opting to take a payment break in order to provide for their families. 

But, is it wise skip debt repayments and what are the consequences? 

Your Accounts Will Go Into Arrears

If you are a credit user, you should know what the implications are of having your accounts going into arrears. When you applied for the loan, you entered into a legal agreement with your credit provider.

If you go into arrears your credit score will most likely decrease, the negative payment of your accounts will be reflected with the credit bureaus, and your ability to repay your loans is assessed when you have to apply for new credit.

Source: Standard Bank

Additionally, you will receive calls from the credit provider, collection agencies and attorneys in the aid to retrieve the funds. 

Interest On The Account May Increase

Besides going into arrears on your accounts, you may see an increase in your interest on the accounts. Due to the missed payments, your overall interest on these accounts will increase, this is because your balance may grow. It is recommended that you make payments for the next 3-4 months which will cover the missed payments on the accounts in arrears.

Your Credit Score Will Be Impacted

Your credit score essentially reflects your credit and payment history. For creditors, it allows them to analyse the risk and how much they will charge you. If you decide to miss a payment(s), it is important to understand the impact it will have on your credit score.

According to Nedbank “It’s impossible to say exactly how many points your credit score will drop when you miss a payment, because that depends on your unique circumstances, but you can expect to see it fall substantially.”

Source: Nedbank

If you are unable to make a payment on time or at all, it is important that you contact your creditors in order to notify them of your situation. In most cases, creditors and lenders will make an exception. However, the missed payment will still be recorded with the credit bureaus.

You May Face Legal Troubles

Missing too many debt repayments may force credit providers to take stricter action. They may go this route to try recover the funds. After many missed payments, creditors might opt to take legal action against you to try and secure a judgment. A judgment will severely impact your credit score.

If you miss too many repayments on your home or car, they might be at risk of repossession. These secured debts hinge on the physical asset as security. This means that if you miss repayments, the creditor has the right to sell these items to retrieve the debt amount owed.

Maybe You Need A Permanent Debt Solution?

If you are finding difficulty with making repayments or if you are undergoing financial stress, contact a registered debt counsellor. Debt Counsellors can negotiate with credit providers and lenders in order to reduce your monthly installment and interest rates. 

Contact us and one of our debt experts will provide you with a free in-depth financial assessment.