Missing a Monthly Repayment May Add to Your Debt
By Space Coast Daily // February 9, 2020
Have you been planning to buy the car you love? Do you want to take that long vacation? Wanting to send your child for further education? Did a medical emergency burden you? Could taking an unsecured loan be the solution to your worries?
We are going to pull the curtains and reveal the answer. Hold tight and read up if taking a personal loan is the answer to your worries!
Before we dig deeper, let’s get the basics clear; a loan is a sum of money borrowed, payable with interest for a fixed term. There are various types of loans in the UAE such as Personal Loan, Car Loan or Home Loan.
And when it comes to rate of interest, it is always at the higher side in case of personal loan UAE, as compared to the rest.
A personal loan is an unsecured funding, payable in EMIs i.e. Equal Monthly Installments; they either have a fixed interest rate or a reducing interest rate, depending on the terms of the contract.
They are of two types: salary transfer loans and or non-salary transfer loans. A salary transfer loan directly deducts the loan amount from your salary. The choice lies in the individual.
Taking a loan in the UAE isn’t really tough, but missing out on a monthly payment may adversely affect your overall financial standing; some of the consequences have been mentioned below.
Be Prepared for the Consequences of a Missed EMI!
The upshots of a bounced EMI can be manifold.
Default Risk
When you borrow money from a lender, you promise to pay back the amount after a fixed tenure. If you fail to do so, you put yourself in the risk of your loan defaulting. A default can happen immediately after missing a single month’s payment or after a few months.
One of the few reasons for missing a payment could be taking on the loan to cover previous debts, and running out of money to meet the EMIs for the personal loan. This leads to adding to your overall debt.
Credit Score
Personal loans have a great impact on your credit score. You should be aware of the importance of your credit score and credit history.
Credit score is a major determinant in evaluating your creditability when you go in the market to raise any source of finance. If your credit score and credit history do not look good, the chances of getting a loan with lower interest rate are next to impossible.
This also means in case of future emergencies which may require immediate funding, the chances of getting a reasonable loan would be very little.
Hidden Costs
There are different kinds of fees involved in raising a personal loan; these fees are generally not clearly disclosed or often overlooked by the applicant. Missing a payment or delaying a payment could lead to fees such as failed payment fee or delayed payment fee.
This adds to your overall debt and pushes you up the debt ladder.
How to Deal with a Missed Repayment?
You can consider the following tips to avoid a missed repayment:
Contact Your Lender
It is best to contact your lender a few days before the repayment date and give a heads up about a delayed payment. This ensures a sense of responsibility, considering which the lender may grant you a grace period to arrange the payment.
Your lender can also help you in preparing a payback schedule and help you in getting credit counseling.
Obtain a Credit Report
As mentioned earlier, the credit score holds great importance in your overall financial standing. It is a good idea to request for a free credit report in order to analyze if your credit score has deteriorated due to the late payment. Even if your payment was only delayed by a few weeks, it may have already affected your credit score.
Cut Down on Avoidable Expenses
If you are not able to meet with your monthly EMIs, you need to find room in your budget to cut down on some of your unnecessary expenses.
Avoiding expenses such as regular outing with family or friends, excessive shopping or partying etc. will help you save on your pocket. As economical as they may sound, it makes an impact when cutting down daily.
Plan a Payback Schedule
It is best to seek the advice of your lender or someone with sufficient knowledge who can help you schedule how you should repay the loan payments, and which expenses are to be prioritized.
Compare and Choose Wisely
When it comes to applying for a loan, it is important to compare across different providers. It is always a good idea to compare different banks or lenders keeping certain parameters in mind such as your budget, to get required loan amount, at low EMI, also, check reputation of the lender etc.
You can initiate a comparison through various online aggregators such as policybazaar.ae. and get suitable quotes with EMIs that suit your wallet.
To Conclude
Debt or loan can be useful in raising funds in the hour of need. However, there are also risks and costs tied to them that you must understand thoroughly before taking any kind of loan. With a little more knowledge, you can make the most out of your unsecured loan.
About the Author:
Pardeep Garg is an online entrepreneur, motivational speaker, and author. He is passionate about Market Research and loves to write on topics Market Research, Business, Digital Marketing, Finance, Information and Opinions to success in life.
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