UNITED STATES — The holidays are upon us and pocketbooks are starting to run thin. Would your bank be willing to let you skip payments around the holidays?
If you have a loan or credit card, your bank may have offered to let you skip a payment during November or December as a way to keep your head above water during the holiday season.
Sounds like a sweet deal, right?
According to Chief Operating Officer of Prestige Financial Rich Hyde, there are some aspects of the “deal” you should think about before you start shifting your money.
With an installment loan, (ie. auto loan), your creditor will add the skipped payment to the end of the loan. So you will still be expected to pay the loan next month.
You will also accrue interest during the skipped payment, so you’ll end up paying a little bit more.
Also, note that if you have a plan to get out of debt by a certain date, that date will be pushed back if you skip a payment.
“It doesn’t hurt your credit … but it hurts your pocketbook,” Hyde said.
However, it could your credit if you’re not careful.
According to Hyde, people who skip a payment tend to fall out of the habit and will sometimes forget to pay again the next month.
But after the first ‘free’ month, creditors will report those who miss another monthly payment. And since payment history affects your credit score, you could be at risk for hurting that number if you skip a payment without your lender’s permission.
In Hyde’s opinion, taking an offer to skip a payment so you have extra money to spend on the holidays will cost you more than it will help.
“There’s no real good reason to take advantage of it, unless you’re in dire straights,” Hyde said.
Even then, there may be a better way to solve that problem, so contact your lender to see what your options are.
If your creditor sends you information about skipping a payment during the holidays, make sure you read the terms of the agreement and get answers to any questions you may have about the offer before you agree to it.