Consider yourself as one of the individuals who make all their payments on time. You are proud of your financial integrity and consider following same pattern in the future. Suddenly, an unexpected situation arises and you lose your job, you have couple of credit cards, a car loan and a home loan. Now the question arises, how would you make all your payments on time? And if there is no scope of paying the EMIs on time, will it affect your credit score? If yes, to what extent will the credit score get hampered? Will you be able to get a loan with a low cibil score?
There are a lot of questions revolving what would happen if I fail to make the payment on time and to what extent will it hurt my credit score, and how will it affect me financially.
If you miss on your payments, it is inevitable that your cibil score would drop and in future if apply for a loan, the lenders will hesitate to provide you a line of credit. Lenders usually view the credit report to understand if you have made all your past payments on time and if you are loan worthy. If you have a lot of loan defaults on your report the lender would usually deny you a loan or else will provide you a loan with higher interest rates as compared to market standards.
But how much will my score affect with a single default? Well the answer for this "depends" on the intensity of loan and also your previous payment records. For example, if you late making the payment with one day, the creditor won't report it to the bureau, but on the other hand if you fail to make the payment within thirty days of the due date, the lender will report it to the bureau and you will start getting calls from collection agencies.
Each credit transaction has its own criteria for information evaluation and assigning to your credit report, so it will vary from lenders to lenders.
If you have high credit score and you skip a payment the score drop will be higher as compared to an individual with low cibil score. For example, a 30 day delay would drop your score in the range of 90-110 if your credit score is in the range of 780 which is taken to be an excellent score. On the other hand an individual with 680 or less as cibil score will face 60-70 range drops, if the payment is defaulted for more than 30 days.
It will end up on your report the credit bureaus are usually notified of your credit transactions by the lenders and if you have defaulted your payment, it will appear on your credit report. The credit transaction stays on your report for more than seven years and it is very hard to write off from your report.
A late fee will be charged different loans comes with different late fee charges, the charges for late fees in cases of home loans will be less as compared to other unsecured loans like personal loans and credit cards. Even if you are late with one day to make your payment, the bank will charge you late fees and make no mistake to deny making payment of late fees, as this transaction will also be recorded on your report.
You may pay higher interest rates in future if you try availing a loan, you may pay higher interest rates as compared to market standards. This happens because of a low cibil score and the lender is taking a risk providing you a loan, hence the higher interest rates.
No individual purposely defaults payments, they are just bounded to an unexpected situation which leads to payment defaults. It is suggested to keep a track of your due dates and amounts so that you do not face such situations, consider taking help from your family and friends in such situations.