Volkswagen Financial Services- 25 Jul 2018

Delayed paying an installment in your car loan? Get ready for a bumpy ride!

Imagine this common scenario: a meeting has been scheduled and you are waiting for the other person to join. And this person arrives late is very casual about it. Think about it, there are times you might have also been late for a meeting and not given any thought about it. We unfortunately tend to think that a little delay is permissible; but that is so wrong.

And if you think, it is okay to delay car EMI payments, you are sadly mistaken!

Don’t drive your credit score down a slippery slope!

A single missed payment can reduce your CIBIL score. A CIBIL score is one of the important parameters to gauge an individual’s ability to repay a loan or ascertain his creditworthiness. This score is based on a formula where late payments account for 35% of your score, followed by appropriate weightages given to account balances and credit history. Frequent late payments will significantly lower your credit score. Also note, if you have a high credit score and are a regular with your payments, you will send flashing red signals in your lender’s head if you happen to delay even once – it is an anomalous behavior that is contrary to their expectations.

It won’t be a smooth drive thenceforth.

If late payments cause your score to fall below the lender's minimum requirement, it will attract late payment fees or the lender might want to renegotiate interest rates. Worse, it might take possession of the car and decide to sell it to pay off the default loan amount.  What’s scarier? The lender can sue you if the pending loan amount is not fully recovered even after selling the car.

There’s more! None of us use the same car throughout life – we generally upgrade or pick a newer model. At that time, the lender might deny the application or charge exorbitant interest rates subsequently.

Life can just simply crash.

Today, we avail of loans to take care of various requirements: home loans, personal loans, mortgages, student education loans. Late payments don’t just affect the credit score, but make their way into our credit reports. If payments end up being substantially late, major credit bureaus are immediately notified and the late payments show up on credit reports. A late payment on a credit report could stay there for 7 years! This means denial of loans, giving up on the dreams planned and result in forcing one to get into the unorganized credit market where the interest rates are dangerously high. A single delayed payment or a series of delayed payments can put you on the road of no-return!

While driving, we keep a firm hand on the steering wheel. So, it is important we keep a firm and steady hand on our payment schedules too. Otherwise we are headed for financial and credit disasters.

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