22 June 2007
A finance expert has warned borrowers to make sure they keep up their loan repayments as even missing one can have a huge affect on their credit rating.
Elizabeth Colman, a financial services reporter for the Times, recently wrote that missing a few repayments could negatively impact on consumers' credit ratings - affecting their chances of being granted credit cards, loans or even a mortgage in the future.
Ms Colman explained: "The irony is that home-buyers are often unaware that there is a problem until they are on the brink of buying a new home. Failing a lender's credit scoring check may be the first clue that there is a problem. After all, who would think that a missed credit card payment three years ago would be relevant?"
Even if those who have missed loan repayments are offered a mortgage, the prices can vary wildly when comparing someone with a perfect credit rating to someone who has simply defaulted on repayments on occasion.
For example, those with a perfect credit rating could take out a two-year fix from Cheshire Building Society at 5.45% with a 499 fee. The monthly repayments on a 150,000 loan would be about 916.
Those who have missed a loan payment in the past 12 months however, would have to settle for a rate of 6.25% and a 795 fee, according to the research by GMAC-RFC, adding 874 a year to the mortgage bill.
The best way to ensure that loan repayments aren't missed is to shop around and make sure you have the best deal and to set up a Direct Debit to avoid missing the schedule by accident.
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