It might seem like a good idea to skip your loan payment sometimes. After all, it will free up some extra cash and you can use it to pay down other bills.
Before you skip that payment, you should know about the potential consequences. Skipping a payment can damage your credit score, increase the interest you pay on your loan, and even lead to foreclosure. In this blog post, we'll discuss the consequences of skipping a payment and why it's not a wise decision.
What Are Skipped Payments
When you skip a payment on your loan, you're essentially defaulting on that loan. Defaulting means you have failed to meet the legal obligations of a loan. Penalties are almost always associated with this and you'll end up owing more overall because of the extra interest that will accrue.
How Do Skipped Payments Work
If you skip a payment on your loan, the lender will likely put your account into default and may take legal action against you. In addition, the lender may not allow you to skip any more payments and may even require you to pay back the missed payment, along with interest and penalties.
How a Payment Deferral Works
A payment deferral is a way to skip a payment on your loan without damaging your credit score or going into default. With a payment deferral, you can skip one or more payments on your loan without penalty. The lender will put your account into deferment, which means that you are still in good standing with the lender and you are not in default. You will then be required to pay back the missed payment(s) along with interest and penalties.
How to Get a Payment Deferral
If you're interested in getting a payment deferral, you will need to contact your lender. They may require that you meet certain qualifications, such as being current on your loan payments or having a good credit score. In addition, the lender may charge a fee for setting up a payment deferral.
Downsides of a Payment Deferral
While a payment deferral may seem like a good idea, there are downsides. First, a payment deferral can damage your credit score. This is because the lender will likely report your account as being in default to the credit bureaus. This will lower your credit score and can make it difficult to borrow money in the future.
Second, a payment deferral can increase the amount of interest you pay on your loan. This is because the lender may extend your loan term or charge a higher interest rate when you resume making payments. In addition, you may have to pay back the missed payment(s) along with interest and penalties.
Finally, a payment deferral can lead to foreclosure. This is because the lender may consider you to be in default of your loan agreement if you skip too many payments. Before you decide to skip a payment on your loan, be sure to weigh the pros and cons carefully. In most cases, it's better to just pay your bill on time rather than face the consequences of skipping a payment.
Exceptions to Deferral Fees
Mortgage Forbearance
Mortgage forbearance is a way to skip a payment on your mortgage without damaging your credit score or going into default. With mortgage forbearance, you can skip one or more payments on your mortgage without penalty. The lender will put your account into forbearance, which means that you are still in good standing with the lender and you are not in default. You will then have to pay back the skipped payment. Interest and penalties apply.
How Long Is a Mortgage Forbearance?
A mortgage forbearance typically lasts for six months. However, the lender may extend the forbearance period or allow you to skip more than one payment.
Student Loans
Many student loans come with an interest-free period (also known as a grace period) where you don't have to make payments for a certain time frame. You will still be responsible for paying back the loan, but you won't have to worry about interest accruing. The grace period typically lasts for six months but may be longer or shorter depending on your loan agreement.
Alternatives to Skipping a Payment
Talk to Your Lender About a Loan Modification
If you're having trouble making payments, you can talk to your lender about a loan modification. This may allow you to change the terms of your loan agreement, usually by lowering your monthly payments and helping you stay current on your loan.
To qualify for a loan modification, you typically need to meet certain requirements, such as being behind on your payments or having a low credit score. The lender may charge a fee for setting up a loan modification.
Be sure to carefully weigh the pros and cons of a loan modification before applying. In many cases, it's better to try other options first, such as a payment deferral or mortgage forbearance. However, if you're truly struggling to make your monthly payments, a loan modification may be the best option.
Get Government Financial Assistance
If you're struggling to make your loan payments, you may be able to get help from the government. One option is to apply for emergency funds from your local financial assistance office. However, you will likely have to wait in line all day and fill out lots of paperwork.
If you're willing to go through the process, financial assistance offices can often provide you with a one-time check to help you out of a difficult financial situation.
Get a Small Loan to Cover Living Expenses
If you're having trouble making your loan payments, you may want to consider getting a small loan to cover your living expenses. This will help you get by until you can resume making regular payments on your loan.
iCash offers instant loans for up to $1,500 with up to three repayments. You can get a loan online 24/7 and receive your funds via e-transfer within a few hours. Everyone can experience financial difficulties at some point in their lives and iCash understands that. We're here to help. If you need an instant loan, we can help you get the cash you need to cover any unexpected expenses. There's a good chance that you will be approved for a small loan with us since we approve 9/10 applicants and even accept government benefits as a form of repayment.
If you’re interested in getting an online personal loan with iCash, but have some questions or concerns, simply contact us. We’ll be more than happy to help!
