Applying Penalty fees is a common practice performed by lenders and credit card issuers in order to discourage borrowers from missing payments or paying late. The problem is that those penalty fees do not compensate for the lenders’ looses but are actually abusive charges that fleece borrowers which sometimes just don’t have the money to pay. A personal Loan can be an escape for borrowers.

Sometimes, these charges do nothing but aggravate an already heavy debt that the borrower can’t afford and push debtors even closer to default or bankruptcy. Avoiding late payments is essential if you want to maintain a decent credit score and thus you should try any solution that is cheaper than a penalty fee and sometimes even those which are a bit more expensive provided they don’t affect your credit.

 

Credit Card Penalty Fees

Credit Card Penalty fees are applied when you exceed the amount of money authorized for purchases or when you don’t pay the minimum amount due on your credit card balance. Credit card penalty fees take two shapes: A fee due to administrative causes related to the paperwork generated by your delinquency and an interest rate over the money financed in excess.

This rate is calculated over the rate for financing your remaining balance that is always applied. Sometimes if you fail to pay the minimum payment, the credit card issuer discontinues your account and blocks any payment made with your credit card. The result is your inability to finance yourself with your credit card and your debt and delinquency getting recorded into your credit report.

 

Loans Penalty Fees

Loans penalty fees only apply in case of late payments or missed payments. Some lenders have certain tolerance to delinquencies and won’t even report a first slip from the borrower. However, repeated delinquencies will trigger these penalty fees that can increase your debt significantly and sometimes the interest rate charged may increase too.

Moreover, in some cases and depending on the loan contract, after a number of missed payments, the lender may have the right to request immediate repayment of the full amount owed. This can lead to foreclosure, repossession and bankruptcy in many cases if you can’t repay the loan in full. Thus, timely payments are essential to your financial health.

 

Requesting a Personal Loan Is Cheaper

Requesting a personal loan to pay for a loan installment or for a credit card minimum payment may sound ridiculous, but sometimes it is not. The interest rate charged by credit card financing is already high; imagine how high a penalty rate or a penalty fee can be. The same goes to loans, though the interest rate may be low, penalty rates and fees are definitely always high.

Thus, requesting a personal loan to pay on time can actually save you a lot of money in the end. Of course, it’s a very heterodox solution and you should consider refinance or consolidation as a long-term solution. But, in the meantime and in case of emergency don’t forget you can always request fast approval for a personal loan and thus avoid ruining your credit and paying abusive penalty fees.