How can Late Payments Affect Your Financial State?
How can Late Payments Affect Your Financial State
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Many individuals who have obtained their own credit cards tend to think of it as free money so most of them would end up in heavy debt because they have managed to accumulate a lot of bad credit in their accounts. If you have found yourself doing the same bad habits in the past, you might have realized that you are not in a good situation after dealing with high interests and late payments. It may not be a big deal at first, but if you want to make sure that you are going to have a clean credit history, it's best to clean your act now.
There are many disadvantages you can get from late payments. One of the most apparent effects you may already feel is the additional costs by companies from not paying on time. If you have a limited monthly budget, you may discover that these fees are hard to swallow and that they do add up eventually. The late fee is one of the reasons why most people are in heavy debt because once they cannot afford to pay the amount, they will dip their hands on their other accounts to cover the cost.
Late fees are not the only thing you should worry about when you always make late payments. A lot of creditors will not hesitate to penalize you by increasing your current interest rate. The additional cost you will gain will certainly hurt your ability to carry a balance. In some cases, overdue accounts would also take away certain privileges you may have when you first signed up. Though it's hard, you can get back the additional amount you have paid by paying on time for the next 6 months or so.
The biggest effect of late payments may be in your credit score. Since all overdue accounts will be reported to credit bureaus, it would eventually reflect on your credit history. Once this would happen, you can expect to feel the backlash for years. A low credit score could mean that you would have to pay a higher interest rate the next time you're planning to take out a loan.