True Impact of Missed Loan Repayments

If you have a loan of any sort, you know how important it is to make payments as and when they fall due.

When we borrow money, we do so with the understanding that we’ll pay it back with a series of payments over a number of months or years.

But what happens when things might get a bit tough financially?

Why does it matter?

When a lender gives you a loan, they are expecting you to make your agreed repayments on schedule.

Many people around New Zealand do this every month, when they’ve borrowed money for anything from a car to house renovations or debt consolidation.

But if you fall behind on payments, there can be additional costs involved, and it can affect your ability to clear your loan in a timely way.

It’s a headache for the lender, and it can be an expensive mistake for the borrower.

What happens when you miss a loan repayment?

You may have a very short window to catch up on a missed payment. But fairly quickly, you could expect to attract some late fees and additional charges.

If you think you’re going to miss a payment, it’s usually a good idea to get in touch with the lender as soon as you can, to tell them what is going on.

Consumer lenders in New Zealand are required to consider hardship applications if you are finding it difficult to meet your repayment obligations. Most lenders will do what they can to support you and help you work through your options.

At better finance™, we may also be able to help you find a way to get back on track.

Most lenders have settings that recognise the difference between a one-off slip and ongoing missed payments. If something happened and your payment wasn’t processed properly, most lenders would be understanding about a payment made a day late, for example.

But if there was a pattern in which your payments were always late, or were significantly late, that could be a different situation.

The ripple effect: Consequences of repeated missed payments

Things can start to get really tough when you have a number of missed payments.

Not only might you be charged fees, but it also means that you have an increasing amount that you need to catch up to get back on track.

It can also affect your credit score and make future borrowing more difficult.

Having trouble with a loan can also cause a lot of emotional and mental stress, which can affect your wellbeing.  It’s important not to stick your head in the sand, though. No matter how off-track things have got, confronting the situation and tackling it head-on is your best approach.

How to avoid missing loan repayments

Understand how your repayments will fit into your budget

Lenders won’t lend you any amount that is unaffordable for you. But it’s a good idea to make sure that you are comfortable with your repayment amount, too. You can use a calculator such as better finance™’s to check what your repayments might be if you’re considering a loan.

Set up payments for the day after you’re paid

If you are paid on a regular schedule, set your loan repayments to go the next day so that you know you should have money in your account. If your income is irregular, set a calendar notification to remind you to check that you have enough money in your account when your payment is due.

Talk to your lender

If your circumstances have changed and you’re worried about your ability to keep up with your loan, get in touch with your lender as soon as possible. better finance™’s advisers are available seven days a week to help.

Debt consolidation options

Depending on your situation, debt consolidation may be something to consider. This could help you get your debt into a more manageable state before you get to the stage where you’re missing payments. Some people find the life admin of managing one loan easier than the juggling of dealing with several. We can help you look at your options.

What to do if you’ve already missed a payment

First, don’t panic. It’s possible to get back on track, and the sooner you start, the easier it will be.

Get in touch with your lender, or contact the team at better finance™ for advice.

Review your budget and work out why the payment was missed. What changes could you put in place to avoid it happening again?

Staying on track gives you peace of mind that you’ll know what your payment will be each month – there won’t be any unexpected fees added.

It should also improve your credit score over time and improve your future borrowing opportunities.

Most importantly, being on track means less stress and more control over your financial goals

Need a hand?

If you’re worried about any of your lending, get in touch with the team at better finance™. We can help you work out what you could do to get back on track. Our expert team of advisers can answer any questions you might have – no matter how tricky things might seem.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.