Big purchases such as acquiring a new home or getting a new car often entails the need to apply for a loan. This is because it is oftentimes challenging to put up a huge amount of money up front. With the feasibility of a loan, you have the opportunity to live in your dream home or drive the car you longed for while paying its amortization.
Thanks to the advancements in technology, everything can now be accomplished online, and this includes car loan applications. Instabank and several other digital banks offer a convenient way of applying for a car loan through their website. Forms can easily be accessed through instabank.no/billan, along with other pertinent information you need to know and process for your application. By entering into the site the amount you want to borrow and the terms you are willing to pay, an estimate of your monthly payments will be displayed. But what if unforeseen scenarios make it impossible for you to make the payments on time? Here are the risks associated with late payments, specifically for a car loan.
Poor credit score
Late payments may have a negative impact on your credit score. As a result, you may have a hard time in applying for other types of loans such as a home loan or a business loan. It is a good practice to keep your credit score in check and in good condition. You can do this by making prompt monthly payments and ensuring that your dues are settled.
Penalties and additional interest
Apart from a poor credit score, late payments often incur penalties. The penalties depend on the contract that you have signed with the lender. In some instances, this is either a percentage of the monthly payment or the balance due. Nevertheless, late payment penalties are on top of the monthly interest rate imposed on your loan. Thereby, it will be tough to keep up with missed payments because the amount you have to pay will add up. In the succeeding months, you will be asked to pay for your missed payments, the interest rates, as well as the penalties incurred.
With frequent late payments, lenders often resort to the repossession of your vehicle. Depending on your contract of agreement, some may repossess your car within a couple of late payments. Still, other lenders opt to skip the hassle of the lengthy procedure of car repossession, thereby, allowing their consumers a deferred payment. While this may be a viable option, there is generally no guarantee.
It is always a good practice to assess whether you will be able to make loan payments diligently to avoid the risks associated with late payments, particularly on your car loan. Making a huge down payment before securing a car loan is even more advantageous in the long run because of a lower interest rate, or a shorter loan term. While taking out a loan is inevitable to enjoy a comfortable life, making sure that dues are settled is definitely necessary.