Bank skip payment offers are not a gift


Adam Gault | fake images

Thinking of accepting your bank’s offer to skip a monthly loan payment? Will cost.

Around this time every year, as consumers try to include vacation-related expenses in their cash flow, some lenders offer their clients the option of skipping a monthly payment on auto loans, personal loans, and credit card debt. While the details of the offers may differ, the result is generally the same – you pay more over the life of the loan.

“These offers are not made for altruistic motives,” said Greg McBride, chief financial analyst at Bankrate.com. “They are financially beneficial to the servicer or the lender who offers them.”

These skip a month offers generally come with a $ 25 to $ 35 fee that doesn’t benefit your balance.

If you take a month off, all you’ve done is hang on.

On top of that, it will extend the life of your loan. With installment loans, the missed payment is usually added last. And interest continues to accrue, which means you’ll pay more overall.

By skipping a credit card payment, the impact could be almost immediate. For example, let’s say you have a credit card balance of $ 5,000 with an interest rate of 12.5 percent. Earn about $ 50 in interest each month. When you miss a payment, interest continues to accrue, which means you’ll owe more next month, even if you haven’t made any new purchases with your card.

“If you take a month off, all you’ve done is hang on,” McBride said.

Consumer debt keeps rising

Category Quarterly change (since the second quarter of 2017) Annual change (since the third quarter of 2016) Total as of the third quarter of 2017
Mortgage debt (+) $ 52 billion (+) $ 393 billion $ 8.74 billion
Home equity line of credit (-) $ 4 billion (-) $ 24 billion $ 448 billion
Student loan debt (+) $ 13 billion (+) $ 78 billion $ 1.36 trillion
Car loan debt (+) $ 23 billion (+) $ 78 billion $ 1.21 trillion
Credit card debt (+) $ 24 billion (+) $ 61 billion $ 808 billion
Total debt (+) $ 116 billion (+) $ 605 billion $ 12.96 billion

Consumer debt now stands at $ 12.96 trillion, according to the most recent data from the Federal Reserve Bank of New York. The amount is $ 280 billion more than the previous record in 2008, at the height of the financial crisis that led to the Great Recession.

The data also shows that severe delinquencies – those 90 days or more behind in payment – have slowly increased for both credit cards and auto loans. That delinquency now stands at 4.6 percent and 2.4 percent, respectively.

Some lenders offer a month’s payment as a regular service to qualifying customers, for example, those who have not missed a payment in the last 12 months. If you accept the offer once a year, you could extend the life of your loan by months.

“The goal should be to get out of debt,” McBride said. “Skipping a payment is a step in the opposite direction.”

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