With the holiday season in the rearview mirror, your budget may be feeling tighter. When those January loan payments come around, who doesn’t wish they could use that money to recover on some holiday expenses instead? But we can’t just skip a loan payment, right? At least not without damaging our credit score or getting a late fee. But you might be able to take advantage of services that lets you skip a payment without those consequences.
Tell us more!
Many credit unions offer a service to their members where they can skip a loan payment without getting late fees or lowering their credit scores. The names may differ but will generally be “Skip-a-Pay,” “Skip a Payment,” or something similar. If you’re eligible, you can skip one month’s loan payment. Basically, your due date just skips ahead to the next month. Often, these services have application fees you’ll still have to pay — they are much smaller than a loan payment though and interest will still accrue on the loan.
Need more of a breakdown?
Let’s say you have an auto loan at your credit union with monthly payments of $373. You apply for a skip-a-pay for the January payment due on Jan. 15, with an application fee of $35. An employee at the credit union will look to make sure your loan fits the criteria — usually, the payments are current and in good standing — and will approve you for the skip-a-pay. The employee then processes the request on your account, taking the $35 from your checking or different account and advancing your auto loan due date to Feb. 15.
A few important things to remember:
Between the time you skip your payment until you make your next payment, interest will still accrue on your loan’s balance. The total length of your loan will also be extended by the number of payments you skip. So, your auto loan was for 60 months and you skipped one payment. You’ll now end up having the loan for 61 months to add in that skipped payment.
Is it worth it?
That depends! You’ll still end up making the same number of payments on your loan but take just a bit longer to finish paying off the loan in full. However, having some extra cash one month could really help you in an emergency or some spending flexibility. As with every financial decision, work with your specific budget and needs to make sure the choices you make are in your best interest. Local credit union representatives are happy to help you weigh the pros and cons to find a good fit as well.