Should You Take Advantage of Skip a Payment Programs?

by Miranda Marquit · 0 comments

During the holiday season, some lenders offer the chance to skip a loan payment. The advertisements for these types of programs talk about having more money for the holidays. And, indeed, skipping your car payment can provide you with a little extra cash flow. However, before you decide to jump at this offer, consider the costs.

No Break from the Interest

While you might get a break from making the loan payment, it’s important to realize that you won’t get a break from the interest. Even though you aren’t making a payment, the interest continues to accrue.

In fact, you are likely to end up paying more in interest. This is because many of these skip a loan payments add the payment back on as part of the loan. The missing payment is capitalized, and you end up paying more in the long run. At the very least, you end up with a slightly longer term. If you make it a habit to skip a payment, though, it can all add up, year after year, with the extra interest.

You should also watch out for fees associated with skipping the payment. Some lenders charge a fee of between $10 and $35 for the skip a payment program. The fee, of course, is usually added to the total on the loan and you are likely going to be required to pay interest on that amount.

When it Might Make Sense

For some, however, skipping a payment might make sense — even with the added interest. If you are really in a tight spot, and the extra money could help this one month, skipping your loan payment through this type of program might be better than putting the money on a credit card, or getting a payday loan. Plus, it’s convenient since you don’t have to do anything but mail back your signature.

Make sure you carefully consider your options first, though. Run the numbers to see what makes sense for you. However, you need to realize that this deal isn’t going to remain for future months. Skipping the payment won’t fix long-term issues that you might have with money.

Avoid the Need for These Programs

One of the best ways to protect your finances is to avoid the need for these programs. Build up your emergency fund so that you are able to handle unexpected expenses. If you find that a $600 car repair makes it difficult for you to pay your bills during the month, and you are using a holiday skip a loan payment program to cover the shortfall, it might be a sign that you need an emergency fund.

Try to build a cushion into your finances each month, and consider cutting back on some of your more regular expenses. Reducing the money leaks in your budget can help you create a little more leeway in your finances.

Bottom Line

Holiday skip a loan payment programs can help you improve your cash flow for one month. However, it is important to realize that interest continues to add up, and there are fees you will have to pay.

Bonus Tip:

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