Making payments on time is crucial for building a good credit history. But, what happens if you don’t repay on time?

This blog will explain how late payments can impact you when applying for secured loans. We will answer common questions and give you some tips to try and improve your credit score.

Understanding late payments

Late payments refer to delayed payments on bills, credit cards and loans. They can have serious consequences, including negatively affecting your credit score. Because of this, you may find it harder to qualify for a loan or other credit in the future.

It’s worth noting that the severity may vary. For instance, if you are consistently paying late this is likely to be looked at less favourably than if you paid late once.

Lenders may also look at them differently. Some lenders may be less flexible with their criteria than others. This means you may be more likely to get accepted with some providers over others.

However, it’s worth noting that if you do get accepted the likelihood is you will be charged higher interest rates, so it is less risky for the lender.

How will it affect your secured loan application?

Having late payments on your credit file can have a big impact on your application, as lenders might view you as a higher risk, leading to a reduced likelihood of approval.

Nevertheless, there are specialist lenders available who offer secured loans for bad credit. So, you still have options. Keep in mind that the interest rates may be higher, and there could be some hesitancy if you're looking to get a large loan amount.

Opting for a secured loan means using a property as security against the loan, which can be either a residential or buy to let property. This approach lowers the risk for lenders since they can repossess the property if you fail to repay. Consequently, you may have greater success with this option compared to an unsecured loan or other alternatives.

Rebuilding your credit history after late payments

To improve your credit history after late payments, make sure to pay your current bills and debts on time. It could be a good idea to talk with your creditors and set up payment plans to keep you on a good path.

Staying proactive in monitoring your credit report is also important. If you spot any mistakes, make sure to get these fixed as soon as possible.

How to avoid late payments

Here are some strategies you could use to try to help you avoid paying late in the future:

  • Set up automatic payments and reminders to prevent missing due dates.
  • Create a budget to manage your finances effectively and allocate funds for repayments.
  • Prioritise debt repayments to ensure that any of your loan obligations are met on time.
  • Seek professional help from debt charities or credit counselling agencies for guidance on managing debts. MoneyHelper and Citizens Advice Bureau are there to offer free support to people struggling to manage their finances, so they could be a good starting point.

Using these tips may help you stay organised, pay your bills on time, and manage your money better. This may help to improve your credit score and increase your chances of success when applying for a secured loan.

Frequently asked questions:

Do lenders look at late payments?

Lenders will check your credit history to see if you can be trusted to repay a loan.  Therefore, they will see if you have paid bills on time.

How long do lenders look at late payments?

It varies. In general, lenders will assess the last 6 years of your credit history. Late payments during this period may therefore affect the loan approval process.

How do late payments affect my chances of getting a secured loan?

Late payments can lower your creditworthiness. This can make it more difficult for you to get a loan. Lenders may see late payments as a sign of financial instability. This might make them reluctant to approve a loan or lead to them offering less favourable terms, such as higher interest rates. 

Summary

Late payments can have a significant impact on your secured loan application. Lenders consider your creditworthiness, which includes payment history, when evaluating your application. Therefore, if you have paid late it can cause problems when you borrow money. If you are approved, you might have to pay more interest or may get poorer terms. Paying on time and managing your money well are important for maintaining a good credit history moving forwards and may increase your chances of being accepted.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.