3 reasons to avoid missing your monthly payments

If you're currently repaying a loan or credit card balance, you might have thought about skipping a monthly payment to cover other expenses. Or maybe you've forgotten to make a payment amid your many other monthly bills. Life can be like that sometimes! But regardless of the reason, missing or delaying your monthly payment isn't a good idea.

In the world of personal finance, it's crucial to pay off your loans and credit card bills on time. Delaying payments has serious consequences, depending on your payment history and how long you go without paying. If you have a history of missed payments, the consequences can be worse. In this article, we'll tell you exactly how missing payments affects your financial situation.

1. Late payment fees

If you're late paying your monthly loan or credit card instalment, you'll incur late payment fees. These fees are charged even if you pay part of your monthly instalment on time. While the amount may seem small, it can add up if you consistently miss payments. That's why paying your full monthly instalment on time is best to avoid these fees.

2. You'll pay more in interest 

If you have a loan or credit card, paying their instalments after they’re due will result in higher interest fees, depending on your bank and the type of card or loan. 

For credit cards, you can opt to pay the full balance to avoid interest charges, but make sure you can afford to pay off the entire amount. If you can't pay the full balance, you can choose to pay the minimum payment, but interest will be applied to the outstanding balance, leading to higher overall interest payments over time.

You can also benefit from the easy payment plans offered on Bank al Etihad credit cards to pay for your purchases. These allow you to turn purchases into smaller, more manageable monthly instalments at 0% interest (when shopping from a partner merchant) or 1% interest (from merchants outside our partner network).

3. Your credit status will decline on the CRIF system

Let's start by explaining the CRIF system: It contains credit reports with detailed information about the transactions of those who have obtained loans and credit facilities from banks and credit providers. Data is obtained and updated periodically through banks and credit providers to reflect each individual's credit status.

Your ability to pay your monthly instalments is crucial in shaping your credit status. If you fail to pay your loan or credit card instalments, it will be recorded in your credit report, leading to a decline in your credit status. Additionally, having multiple loans and credit facilities from different banks or providers can also lower your credit status.

But how does a decline in your credit status affect you?

Banks view a decrease in your CRIF status as a sign of your lack of commitment and irresponsible financial behaviour. This, in turn, may lead them to consider you a risky customer due to the possibility of non-payment. As a result, you may lose your ability to access financial facilities. When you apply for a loan or credit card, the bank will reject your application to protect its assets if your CRIF status is very low.

The CRIF scoring assessment system is an indicator used to predict a client's ability to make payments or the likelihood of their default in the 12 months following the inquiry about the client.

On the other hand, paying your instalments on time will positively impact your credit status. Banks will view this as responsible financial behaviour, increasing your chances of getting future loans and credit cards with better interest rates and higher limits to meet your financial needs.

How to avoid missing payments?

Taking the necessary steps to avoid missing payment will help you maintain a good credit status and secure better borrowing rates. Follow these tips:

1. If you tend to forget, set reminders or use our mobile banking app to schedule automatic payments.
   
2. Ensure you have enough funds in your account by your monthly instalment due date.
   
3. Create a budget and plan ahead to repay your debts.
   
4. Make paying your instalments a priority when you receive your salary. This
   may require changing the instalment due date.
   
5. Try setting aside an emergency fund to be able to pay off your instalments even if you have unexpected expenses.
   
6. Don't borrow more than you can pay off. Also, consider your monthly expenses when deciding how much to borrow. For example, if you plan to get a car loan, think about buying an electric vehicle to save on fuel costs and make payments more manageable.
   
7. If you think you might struggle to pay your loan instalment in a given month, request a postponement by notifying the bank before the payment is due. This option is available twice a year, subject to the bank's terms and conditions. If you're eligible, you can follow the steps here to make a request through our mobile banking app without visiting a branch.

What should you do if you're having trouble paying your monthly instalments?

We understand that unexpected life challenges can make it tough to meet your financial commitments. That’s why if you're having difficulty paying your instalments, please reach out to us. We're here to support you during tough times and are committed to helping you find the best way to manage your financial responsibilities. By discussing your situation with us, we can explore options together to ease your financial burden and work towards finding a solution that suits your circumstances, ensuring your financial stability.