Know the importance of on time credit payment. What are the repercussions of a delayed or non payment of credit card/ loan installement?

In our present today, plastic money is the order of the day; inflated costs of living & aspirations for achievement & growth are fuelled with the readily available credit.

There are no stops to starting a new enterprise fulfilling ambitions, living a good lifestyle or travelling to see the world. Credit cards, mortgages, auto loans, personal loans & business loans are an integral part of daily finances.

The business of offering credit is now a part of retail banking, all leading Banks & NBFC’s are willing to offer credit at a cost. The management of finances & credit is necessary as all the transactions are now monitored closely by Lenders, be it a Bank, Limited or a Private lending agency & reported to Credit rating agencies.

With the electronic age of today all details of an individual are linked together, all relevant identity proof are linked with Bank accounts & can be easily traced back. So therefore an EMI or credit payment must be adhered to diligently.

Many a times due to an emergency or an oversight a payment could be skipped or delayed, reminders are usually sent through the registered mail ID & mobile number informing the client about the dues: prompt payment made at this juncture could save individual numerous hassles although the bounce of an installement will be noted & registered. A grace period of 7 to 10 days is normally given by creditors before the same is reported to Credit Bureaus.

Delayed or non payment of dues can have serious repercussions:

NOTIFICATIONS MADE TO CIBIL (CREDIT BUREAU OF INDIA LTD) & PARALLEL AGENCIES

All banks & financial institutions report the credit details of their customers & account holders on a regular basis to CIBIL & other credit recording agencies. The CIBIL in turn keeps a comprehensive record of the applicant: a credit score is generated on the basis of the individual’s credit history.

The unpaid installement of the Loan account will reflect as a bounce in the CIBIL history, the number of days after which the EMI has been cleared & if not paid will be shown as pending or overdue.

Unpaid Credit Card bills will be reported, delays being measured in buckets of 30 days. If the minimum payment of credit card is being done timely no delays will reflect, though the total due will be included in the credit ratio.

The CIBIL score of the customer will portray the credit management & a bounce or delay will be marked permanently, such aberrations will cause the score to dip.

EXTRA CHARGES & FINES WILL BE INCURRED FOR THE DELAYS IN PAYMENT

Any delays in repayment are chargeable. If the EMI of a loan bounces the applicant will have to pay additional charges for the return of the EMI, with interest being charged on a daily basis for the number of days the amount due remains unpaid. File charges as specified will be applied by the provider.

For an unpaid credit card bill amount an interest rate of 36% per annum is charged by most issuers: in addition late payment charges will be levied if the minimum due of 5% of the total credit card bill is not paid. For all loans take against the card for the purchase of consumer products, the EMI being paid through the card, the charges for the delayed EMI will be added to the bill.

Thus the interest paid on the delayed EMI of a loan taken through a credit card will be compounded, as the card holder will have to pay the late charges to the Bank for the delayed installement & towards the credit card for the late payment charges added therein.

AFFECT AVAILABILITY OF FURTHER CREDIT WHEN NEEDED

A faulty repayment track will always reflect in the credit history of an individual: whenever there is a need for credit an enquiry will be sent to a Credit recording agency.

The Bank to which the application for credit is submitted will study the complete credit history of the applicant: the number of times credit has been applied for, the various loans & credit cards previously held by the applicant, those successfully closed, any delays, defaults or over dues showing currently or in the past.

If there is an EMI bounce in the last 3 months the request for credit will not be processed, it is advisable not to apply for credit if any EMI has bounced in the last 3 months prior to the application date.
Thus it is important to keep an on time repayment record, as when funds are required in an emergency may not be easily available.

GREATER AMOUNT OF FUNDS MAY NOT BE SANCTIONED READILY

The applicant’s ability to manage & pay back credit taken will be taken into account if larger amounts are required: the current outstanding dues in relation to the income will govern the amount of credit that can be issued to him further.

Thus an applicant can secure maximum funds & can negotiate a good rate of interest if the credit score is above the required benchmark, & the repayment track is a clear one.

FURTHER CREDIT WILL BE AVAILABLE AT GOOD TERMS FOR INDIVIDUALS WITH A GOOD CREDIT HISTORY

Leading financers are ready to offer credit at the best terms to an individual with a good payback record: special rate of interest are offered for loans & mortgages, prime offers will be made for additional credit cards.

Applications for further credit will be processed speedily, if application for credit is made Banks with which credit exists quick approvals are granted

A GOOD CREDIT RECORD IS THE TESTIMONY TO THE CHARACTER & MANAGEMENT SKILLS OF AN INDIVIDUAL

The Credit record of an individual is referred to by Banks before issuing further credit, but also by organisations: all senior positions applied to in prestigious organisations will refer to the credit record as part of the resume of the applicant. It is not just the defaults which will be noticed but more importantly the intention to pay back finance taken & the ability to bounce back from difficult situations.

It all starts with a delayed payment or an EMI which if not immediately tended do can multiply into a large debt: Timely paying back dues is an attitude of being prompt, a good manager of finances , it reflects on the Individual being worthy of the trust invested to pay back Debts.