When paying back money you have borrowed, there are several mistakes that people have a tendency to make. The following is a list of the most common mistakes.
This is obvious, but it must be included. Late payments can hurt your credit rating and increase the amount of money you owe due to late fees and penalties. Although there may be times when you cannot make a payment on time, you should avoid doing so because of forgetfulness or other careless reasons.
Contact your lender if your payment is going to be late
If there is a financial emergency creating a situation wherein you will be late in making a loan payment, be sure to contact your lender in advance. Let them know to expect a late payment. Lack of communication with your lender can create additional problems. This is especially true if you have taken an unsecured loan with your bank.
Not including your account number on your cheque
This is usually not a problem when paying by cheque, because your account statement will accompany the cheque. However, people make mistakes, and it happens that your check can be separated from the statement. This will cause a delay in your payment being recorded on your account, and this can create a delay. It is possible this could be misconstrued as a late payment. When paying by cheque, always include your account number on the check.
Making an extra payment
Although it can be a good investment to pay additional money on a loan, you must be sure that you can afford it. Any money that is paid beyond the monthly amount that is due will go towards the principle of the loan and help you pay off the loan sooner. If you do this and cannot afford to, you can easily end up with problems making your payments on time in the future.
Prepaying without telling your lender
If you intend on making two payments instead of one, you need to inform your lender about this. Perhaps you want to take a vacation and plan on being away from town for a while and won’t be able to make a payment on time. A problem can arise if the additional monthly payment is applied to the principle. This will mean you will still owe your next monthly payment even though you believed you have already made it. This can lead to a delinquent account. If you are paying for two months in advance, inform your lender about this.
Borrowing money to pay a loan
This is a big mistake for your personal finances. It seldom makes sense to borrow from one lender to pay another. If you are having this much trouble paying back a loan, your first step should be to talk to your lender about the situation. There may be other and better solutions to your problem.