Avoid Late Payments With These 7 Tips

Avoid Late Payments With These 7 TipsOne of the things you want to always look out for as a consumer is to avoid late payments when it comes to your financial obligations. This is one of the most important details you have to look into as an adult. When you were still in college or younger, you might not have thought about it that much. However, this is an important aspect of your life when you are trying to get ahead with your finances and trying to reach your goals.

For one, late payments can greatly damage your credit score. Once that happens, your score will dip and you encounter multiple but avoidable financial challenges. For one, applying for a loan might start to become harder than it already is. Lenders will start to double guess your loan applications and might even deny some if your score is really low.

This is just one of the reasons why you need to avoid late payments. Lenders might still approve your loan or credit applications but you would have to contend with a high-interest rate. This is to ensure that they are covered for the risk they are taking to lend you money. Paying high interest on a loan for years can cost you a lot of money you could have used somewhere else.

One thing you need to understand is that your payments have a direct effect on your credit score. In fact, FICO explains that payment history makes up about 35% of a score. This means that when you have a lot of late payments reported on your credit, your score will have a significant drop. Once you understand this, you will try to find ways to pay on-time. Here are few tips to help make sure you always get to send out your payments on time.

Review your bills

One of the first things you need to look at to avoid late payments is to sit down and review all your financial obligations. This includes all your debt payments from the big-ticket items to credit card payments and even regular utility bill payment. The idea is to get a pen and paper handy and simply list every single detail down. You can do it with a computer but the important thing is to come up with a list.

Once you have your list, one thing you need to take a look at are the due dates in relation to when income comes into your budget. If you get paid every 15th and 30th of the month, you need to look at what payables fall on those dates. Are you able to cover your payments when they become due or do you have to float payments over to the next payday to get by?

If you can pay them all at once with your income then you don’t have much problem in that area. However, if you cannot meet all of your payments because of the due date, there is an easy fix. You can call up your lenders or creditors and ask if you can have your due date moved to another date. Some of them may not approve this but if they do, then you can avoid late payments because you get to schedule payments better.

Make sure you have a comprehensive budget

As you have already made a list of your debt payments, you can use this list to create a comprehensive household budget. One thing you are looking for when you create a list is if you have enough income to support your budget. It is not only your expenses you have to look into. You also need to make sure that you can save enough for the future.

One of the possible scenarios which can happen when you only have enough or barely enough for your expenses is that your savings start to suffer. It can be for your retirement fund where you are unable to make it grow over time. Your emergency fund might also suffer because you do not have any more funds to spare after paying your obligations.

It is important to avoid late payments but you need to balance it as well with your future outlook. For one, you have to save for your retirement fund as early as possible. The sooner you get started with it, the sooner you can retire. You also get to use compound interest to your advantage when you save for retirement early.

Create a payment schedule

After you have written down all your payment obligations and how it stacks up to when you get paid, a payment schedule is next. As the name suggests, this is simply a schedule of which bill gets paid on what date. This helps you remember and keep track of your payments. Once you have this, you can even explore enrolling in automatic payments with your lender. Once you do this, you just have to monitor the payments that go out every month.

Try making advance payments

This can help relieve a lot of stress from your plate because you are making payments for months ahead. Of course, it goes without saying that this would be difficult if you have a tight budget, to begin with. It is an idea you can look at when your finances improve over time. Apart from being able to avoid late payments, you also get to pay off your debts sooner.

Schedule a day for payments

It can be a day where you send out all your payments or simply a dedicated day or weekend to go over your finances. Doing this helps you stay on top not only of your payment obligations but your overall finances as well. When you are able to do this, you put yourself in a position to make changes if and when necessary. The important this is that you are able to make informed decisions because you understand your finances.

Organize documents and paper trail

This will help you stay on top of your payments and be able to dispute any errors that could show up in the future. If you still send out checks to your lenders or creditors, you need to keep track of all statements and payments you send out. If you make online payments, you need to save a paper trail or any form of payment confirmations or notices you receive after a payment. This will help you create a payment history for each lender and proof of payment as well.

Focus on strengthening your emergency fund as well

This might sound a little out of place when you are talking about on-time payments. However, this can actually help you stay current on your payment obligations especially when you are going through a rough time. If you find yourself in between jobs for an extended period of time, your emergency fund can come in and take care of your payment obligations while you look for a new job.

There are a lot of benefits when you try and avoid late payments on your account such as a high credit score. You also get to save money in the process. Instead of paying interest, fees and other charges on late payments, you get to save that money and put it in savings.