How To Avoid Loan Penalties

Have you ever been late on a loan payment?

Seemingly just when you need it least, banks and other lenders slap hefty charges on your account. This is the last thing you want, particularly when you're finding it difficult to keep up with your payments. It's like a spiral, you're late on a payment and you get a late fee, then this fee will make it harder to meet your next payment so you get an additional late fee, or you get a late fee from one of your other accounts. Before you know it all your money will be going towards late fees instead of on the payments themselves.  

How to deal with late payments 

Well the first thing to keep in mind is that you can never be charged a late fee for being late on repaying a current late fee. For instance, let’s say you owe $100 on a credit card. If you were late you may incur a $20 late fee. On your next month you'll still owe the $100 plus interest, but you'll also owe the additional $20 late charge. If you only have enough to cover for the $100 plus interest, then pay that, and tell the lender in your bill payment that this is for your regular payment. You'll still owe the $20 late fee, but you can't be charged a late fee for not repaying it on time.  

So one recommendation if you happen to have more than one account, would be to try and stay up to date on all but the late one. Do not be late on one account this month, and another account next month. Stay late on the same account for both months. The reason for this is that the account you're late on could only charge you a lot of fees. If you let yourself get late on different accounts, every one of them can slap you with fees.  

What to do if you can’t make a payment on time 

If you think you're going to be late on a payment, the best thing for you to do is call the creditor and let them know about it. This is much better than if you simply let the bill to go unpaid without any explanation. Lots of creditors will allow you to reschedule your payments, or give you extra time without charging you for it. They want to work with you on getting the bill paid, instead of letting the bill go unpaid and leaving them in the dark as to your intention.  

If the creditor you're going to get behind on will not allow you to reschedule the payments, then it would be better if you try with another of your creditors, and then let that one get a little late as an alternative.