A late payment is an amount of money that a customer or borrower sends to a service provider or lender that arrives after it is due.
There can be many reasons for a customer or borrower to be late on a payment. They can range from not having the money to make the payment to simply forgetting that it was due. Whatever the reason, there can be a number of consequences if the situation is not properly handled.
Consequences of a Late Payment
Late payments will typically cost the borrower more money. Penalties can include late fees and additional interest charged to the borrowed amount.
Late payments can also affect a person’s credit rating, depending on several factors. How late the payment is past the due date can be the biggest factor. A payment that is 90 days late will hurt a person’s credit more than a payment that is 30 days late. While it might seem counterintuitive, a person with a higher credit score can be affected more by a late payment than a person with a lower score. A person with a lower credit score often has a history of late payments, so the late payment by a person with a higher score tends to stand out.
How to Handle a Late Payment
The best thing to do in the case of a late payment is to contact the lender or service provider to explain the situation and to get back on track with payments. Staying in communication with the lender or provider is key. To restore credit and to avoid future penalties, it is important to find ways to make payments on time going forward.
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