When you buy a mobile phone in installments, you have to sign a contract with the respective service provider. The contract binds you to pay a fixed amount of money monthly. However, there are always chances that you may face a financial crisis during that time. It may give rise to several consequences, such as affecting your credit score, disturbing your mental health, and declaring you bankrupt.
If you are in the UK and want to know what can happen if you become unable to pay your free smartphone contract payment. You do not need to panic; we are here to help you out. In this helpful guide, we will explain what can happen if you do not pay your mobile phone instalments on time. And how can you avoid an onslaught of calls from debt collectors in the UK?
What is a phone contract?
A phone contract is an agreement that you make with a service provider in exchange for a phone, calling minutes, and text messages. Under the deal, you agree to pay a fixed amount of money to the contract provider for a certain period of time. It is pertinent to mention here that this is a signed contract, and you must pay the regular instalments on time to avoid any later hassle.
What happens if I do not pay my phone finance installment?
If you do not clear your monthly finance plan payment in due time, the service provider company can take certain strict actions against you to draw the money out of your pocket. Here is what they can do:
Application of the Late Payment Fee
Like any other credit card bill, phone contract bills are also subject to late fees if the monthly instalment is not released in due time. Most businesses can levy a late payment fee of up to 1.5% of the outstanding balance. Most of the monthly instalments are due in 30 days, with a grace period of 90 days. If you pass that time without making payment to the company, it can disconnect your smartphone and all other related services, along with the application of a late processing fee. Some providers may take these sorts of strict actions after just 24 hours of the scheduled date of payment.
Bad Impact on Your Credit Score
A credit score is a crucial parameter to judge the creditworthiness of a consumer. It ranges between 300 and 850. The higher a borrower’s credit score, the more appealing he or she appears to potential lenders. Usually, if you manage to pay the finance instalment within the grace period of 90 days, your credit history is not reported to the credit bureau. However, if your contract payment is past its grace period due date, your balance may be reported to the credit agency. Eventually, it decreases your credit score.
You Can Be Reported To A Debt Collection Agency
Debt collection agents are notorious for making your life hell by making you receive a plethora of calls and emails reminding you that you have an outstanding balance. If you do not take appropriate steps to clear your contract debt, the service provider may reach out to a debt collection agency to recover outstanding dues from you. The recovery agents from the collection agency then started disturbing you every now and then through calls or emails, asking you to clear your debt. These agents can only be stopped either by making the payment or declaring bankruptcy.
Asking for a County Court Judgement
If you make no arrangements to clear the arrears, the debt collection agency or the service provider may take it to court. The agency may ask the judge to pass on a County Court judgment. The judgement forces you to either clear your debt or make arrangements to pay. If you do nothing even after the issuance of a judgement, the company may ask the judge to enforce the debt recovery. The court then appoints a bailiff, who comes to your house and holds your valuables, which can either be sold or remain held till you clear your contract payment. It is important to mention here that you will have to bear the bailiff fee on top of your growing arrears at this point.
Making You Insolvent
If your arrears grow beyond £5,000, the debt collection company will try to declare you bankrupt through the court system. It will have a disastrous effect on the rest of your financial life. Depending on the type of bankruptcy, you may lose several of your valuables. For instance, you may have to give up your home, car, shares, and other valuable assets. Your trustee will have to sell these assets to pay your creditors. Since your credit score is based on your credit report, bankruptcy can seriously influence it.
I cannot pay my free smartphone contract payment; what should I do?
If, due to any financial constraint, you are unable to clear your outstanding balance within a limited time span, these are the measures that you can take.
Reach Out to Your Contract Provider
If you are in arrears on your phone contract, it is preferable to discuss the issue with the contract provider company rather than avoid it. As it will make things even worse in the long run. What you can do is speak to the service provider or collection agent and let them know about your financial condition. Based on your situation, the charity foundation can come up with a range of possible solutions for you. These include:
- lowering your monthly payments to more affordable levels
- Changing your bill date to a more feasible date
- Delaying payments for an extended period of time
- Moving you from a “pay-monthly” to a “pay-as-you-go” plan
Make contact with a Debt Charity Foundation.
If you have a lot of debt, you should seek help from a debt charity or a debt advice foundation. Based on the situation, they can propose a number of feasible solutions. It may include:
- Stopping the contract providers from taking enforcement action against you
- Protecting your valuable assets by avoiding bankruptcy
- Talking with your service provider on your behalf to come up with a cheaper payment tariff
The Bottom Line
Mobile phones have become a necessity these days. You can either buy a cheap 5G smartphone or buy a costly Android smartphone on monthly installments, as Laptop Outlet is offering. However, in case of non-payment of your arrears, you may face certain financial restrictions. For your ease, our experts have curated this guide to let you know the consequences of non-payment of your contract as well as the measures that you can take to easily clear your outstanding balance.
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