Late payment penalty and how is it calculated?

What is late payment penalty?

A late payment penalty is a fee that is charged by a lender to a borrower for failing to make a loan payment on time. The amount of the penalty is usually a percentage of the outstanding balance of the loan. For example, if you have a loan with a balance of PHP 10,000 and the late payment penalty is 10%, then you will be charged PHP 1,000 for each day that the payment is late.

Why do people get late payment penalties?

There are many reasons why people might get late payment penalties. Some common reasons include:

Forgetting to make a payment

‍This is the most common reason for late payments. Sometimes, people simply forget to make their loan payments. This can happen if they are busy, stressed, or simply forgetful.

Not having enough money to make a payment

‍This can happen if people lose their job, have a medical emergency, or experience some other financial hardship.

Making a late payment on purpose

‍Some people make late payments on purpose in the hope that they will not be charged a penalty. However, this is a risky strategy, as lenders can take legal action against borrowers who repeatedly make late payments.

How is late payment penalty calculated in the Philippines?

The late payment penalty in the Philippines is calculated as a percentage of the outstanding balance of the loan. The percentage is set by the lender and is usually between 5% and 20%. For example, if you have a loan with a balance of PHP 20,000 and the late payment penalty is 10%, then you will be charged PHP 2,000 for each day that the payment is late.

How to avoid late payment penalties

The best way to avoid late payment penalties is to make your loan payments on time. If you know that you are going to be late with a payment, be sure to contact your lender as soon as possible. They may be able to work with you to create a payment plan that will help you avoid penalties.

How to get help with late payment penalties

If you have fallen behind on your loan payments, there are a few things you can do to get help. First, contact your lender and explain your situation. They may be able to work with you to create a payment plan that will help you get caught up. You can also contact a credit counseling agency. Credit counseling agencies can help you negotiate with your creditors to lower your interest rates and monthly payments.

You can also compare and find suitable loans here and get loan for the first time with low interest rate and monthly payment, so you can avoid late payment penalties.

Late payment penalties can be a costly mistake. By making your loan payments on time and avoiding late payments, you can save money and improve your credit score.