A report by credit reference agency giants Experian showed that 1 in 5 Britons have been forced to skip payments on loans because they were unable to afford the repayment.
Another 30% also said that they had missed a payment by simply forgetting it was due.
Elsewhere, reports have stated that wages are not rising at the same rate as inflation in the UK. This means that for many it is harder to maintain living standards, and paying bills is becoming a huge financial strain.
Missing a repayment will negatively affectyour credit rating, which can affect your ability to borrow in the future. It’s likely thata missed payment will stay on your credit report for 6 years before it is removed.
6 years is a long time by anybody’s standards– you may need to put down a deposit for a substantial spend,such as buying a car or moving house, so keeping a clean credit report is a wise move.
You may also be surprised to know that credit reports can be used to help calculate your insurance premiums, and have even been known to be used in employment approvals!
What to do
If you are in the position of knowing that you cannot meet your next repayment, the first step is to contact your creditors and notify them of your circumstances.Most creditors will be happy to help you come to an agreement as “customer interests” and “fair treatment” arepart of the FCA’s (Financial Conduct Authority) eleven principles for business. Thismeans that if you are unable to meet repayments, the creditor should first try to work with you to find a solution before taking legal action. It is within the company’s interests to ensure that you repay what is owed; any debt that needs recovering will cost a company to collect.
It’s sensible to build up a list of your essential spends. Work out how much your average weekly shop, monthly utilities and phone bills are costing you.From this, you should be able to work out how much income you have left.
There are many budgeting tools online that can help you with this task. Having everything down on paper should help you to see where you can make savings and also how much you can afford to repay to your creditors.
If you’re really struggling, then speak to debt management charities and hotlines. A Debt Management Plan(DMP) can be a useful strategy to help you manage and reduce your debts if you’ve reached a point where it’s become unmanageable. DMPs are informal agreements set up to ensure that you can repay parts of your debt but still retain enough income to live on. There are companies that will help you coordinate this for a fee, but there are also charities such as Step Change that offer a free DMP service and advice.
If you are one of the 30% of people who have missed a payment, by forgetting the due date, this can be easilybe fixed. The best way of resolving this issue is to set up payments by direct debit from your account.If you have access to internet banking you can set these up yourself or alternatively, call into your local branch for help with establishing this type of payment. Direct debits allow payments to be sent from your account automatically, meaning that you’ll never miss a payment as long as you have the funds available.
This article has been written by Jamie Smith on behalf of No Fee Loans UK. For more top tips on how you can manage your loan repayments visit their website