Defaults are troublesome and can have wide-ranging impacts on your life and finances, terribly affecting your quality of life in the process.
Have you recently defaulted on a monthly payment? Do you feel the heat and pressure of sinking into a financial meltdown because of this? Defaults are troublesome and can have wide-ranging impacts on your life and finances, terribly affecting your quality of life in the process. They’re often seen as signs of poor financial management – something that isn’t taken pleasantly by lenders. The good news is that they aren’t the dead end, really! They certainly induce setbacks by causing a string of rejections when you apply for new loans or credit cards, but things can definitely change if you take corrective measures. Before we go on to look at how to cope with a default, let us understand what defaults actually are.
What exactly are repayment defaults?
Technically, a default is a missed monthly payment towards a loan/credit card for a period of more than 30 days. Anything past the due date is considered a late payment, and late payments aren’t a good thing either. But non-payments (defaults) have a more serious impact on your credit score, sometimes causing your score to drop by 50-80 points (just 1 single default). Even a single default in the last 6 months to 1 year can ruin your chances of getting approved for a loan or credit card, despite your income being reasonably good.
Individuals with a good credit score often get approved for higher loan amounts, get offered a better interest rate, and more flexible loan terms. That said, the importance of a good credit score cannot be understated by any margin. More than just inflicting rejections, a poor credit score can affect your quality of life, limiting your purchasing power and consequently impacting your standard of living. But hold on there! They don’t really spell endless doom.
Watch: How To Withdraw PF Online
Why Defaults Aren’t Really the Dead End?
Time for the good news – it’s not the end of the world if you’ve had a spell of defaults. Here is what you can do if you’ve recently had a series of non-payments and your credit health has taken a severe hit in the bargain.
# Apply for credit with Fintech Lenders: While it is true that defaulting on payments will limit your approval chances, you can apply with certain Fintech Lending Companies who have fairly easy-to-meet eligibility criteria. Some lenders allow you to qualify for credit even with a score of 575 if a bunch of other criteria are met. Ideally, if you have a low credit score because of defaults in the past, regain lost ground by making regular payments in the months to follow and send-in your application to a Fintech lending company. While it isn’t guaranteed that you’ll get approved for the amount you want, if your income is good enough and you don’t have too many debt obligations, it is highly likely that you’ll get approved.
# Consolidate your debt: Many Fintech lenders offer debt-consolidation loans. If you have multiple credit cards or personal loans, there is a high probability that you’re headed towards a potential default. Prevent this from happening by taking out a personal loan for debt consolidation and direct your repayment towards a single source. Besides helping you ward off a default in the future, it can also help relieve a lot of stress.
(By Aditya Kumar, Founder & CEO, Qbera.com)