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Skipping a Payment over the Holidays

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Skipping a Payment over the Holidays

Q. Is skipping a payment during the holidays to free up cash a good idea, or is this something I should avoid?

A. The answer to your question depends on your creditors and their policies.  If one of your creditors offers you the option of skipping a payment, you need to do a little extra work to get a handle on how the process works.  You also need to understand how skipping a payment will influence you in the long run.

When you receive a “skip a payment” offer from one of your creditors, you need to understand that you aren’t really skipping a payment, but deferring it until a later date—all the way to the end of your loan, in fact.  This means you’ll pay extra interest over the life of your loan and will add extra time to your repayment period.

Assuming you’re eligible, skipping a payment can be a way to free up cash, but I encourage you to think beyond the Christmas shopping season before you decide if this is the right decision for you.  Do you really need to skip a payment?  Have you looked at your budget and made a detailed gift list? Would it be wiser to curb your spending if your budget is tight?  

It would be nice to have a crystal ball that could foretell your financial future.  But since none of us have one, you need to consider what would happen if you have a medical emergency or are out of work for a short time.  Given that none of us knows what the future holds, it might be prudent to wait until you really need to miss a payment with your creditor’s approval, rather than to use the opportunity to buy Christmas gifts. 

You should know, too, that you can’t simply skip any payment you want during the holidays. Creditors create special programs for people looking for a little extra cash. If you are 30 days late or more to any creditor that reports on your credit report, your credit score will take a hit. If you miss a payment and your account goes into collections, your credit score will suffer, too. In this case, not making a payment has long-term negative consequences. 

If you skip a payment without permission, but aren’t 30 days late, you could still end up with late fees and additional interest.  If you skip a utility payment, you could end up with your utilities being disconnected.  Then those Christmas presents become even more costly. 

Skipping a payment that you have to make up is difficult to do.  How large is the payment that has to be made up?  Where is the money going to come from?  How many extra fees will you pay?

Think back to your childhood. Out of all the years you were growing up, you may remember a gift or two. You’re more likely to remember who you spent Christmas with and what you did during the holidays.

Don’t start the New Year off trying to catch up on payments and late fees.  Use the holidays to create memories rather than debt.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email acce@acce-online.com.

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.