The economic impact of COVID-19 is likely to result in even more missed payments this year. Pre-festive promotions such as Black Friday and Cyber Monday, as retailers tried to make up for lost lockdown sales, won’t have helped.
According to the National Debt Counselling Association, December is a critical time for consumers to make sure their payments are up to date.
“As well as retailers encouraging spending, most people are on holiday and are spending more than usual. The result is that we often we see consumers picking and choosing which debts to pay over the festive period,” said NDCA chairperson, Benay Sager.
The problem with this behaviour is that it usually drives up the cost of borrowing significantly because it negatively affects people’s credit ratings.
“Lenders consider consumers with poor credit scores higher risk and either won’t lend to them or charge higher interest rates to offset the risk,” Sager added.
He explained that after what has been a very difficult year, it is understandable that people want to reward or indulge themselves a little but warns against taking out additional debt to do so. A short-term indulgence can have long-term financial implications.
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