How do timely loan payments benefit you?
A loan is a type of debt that a person or organization obtains from a lender and then repays over time. Individuals and businesses can benefit from loans to finance large purchases or cover unexpected expenses. However, loans must be repaid, and borrowers who fail to do so may face serious consequences such as credit score damage or even foreclosure. As a result, borrowers must carefully consider taking out loans they are confident of repaying. For fast and secure payment, you can always rely on UPI payment apps like Bhim UPI payment app, MobiKwik, etc.
What Exactly Is Loan Repayment?
Making payments on a loan, typically in periodic installments, to repay the principal balance and interest owed is known as loan repayment. It usually begins after a grace period, which is a set period during which the borrower is not required to make loan payments.
There are several repayment options, including the standard repayment plan, the extended repayment plan, the graduated repayment plan, and the income-based repayment plan. The borrower must repay the loan within ten years under the standard repayment plan, while the extended repayment plan allows the borrower to extend the loan repayment period to 25 years. The graduated repayment plan begins with lower monthly payments that gradually increase over two years. The borrower’s income and family size determine the monthly payment amount for an income-based repayment plan.
Benefits of Timely loan payments
- Increase your credit score –The size of your loan and the interest rate are frequently determined by your credit history. If you already have a loan and make on-time EMI payments, your credit score will improve. The timely repayment of each monthly installment strengthens your credit point. When you apply for a loan, the bank/NBFC considers your credit history before granting your loan request.
- Avoid paying late or default fees- Failure to repay a debt, as well as making late or no payments on a loan, can have serious consequences for the borrower. Lenders may seize your assets if you fail to make your Muthoot finance online payment for a long time. Furthermore, they may levy a hefty penalty if you default on your loan.
- Get access to additional loan options- A top-up loan is a type of financing in which the borrower receives an additional loan on top of the one they already have. A timely EMI payment will raise your credit score, and as a result, you may be able to obtain a new loan to make up the difference.
- Increase your credibility- Lenders make money by charging fees and interest to borrowers. Borrowers, on the other hand, seek financial assistance from lenders. Because of your credibility in this relationship, you may be able to obtain loans or a higher credit limit. Making timely payments is the only way to establish credibility.
- Avoid paying high-interest rates- Credit card interest rates are the highest of any financial instrument. The annual percentage rate can reach 35-40% in some cases. Paying off your credit card debts late can result in accumulated interest charges due to credit card companies’ high-interest rates. If not properly managed, you may end up paying far more than was originally agreed upon.
- Obtain loans with lower interest rates- As previously discussed, paying your credit card and loan EMIs via the Bhim UPI payment app on time can help you improve your credit score and history. This can assist you in obtaining a lower interest when opting for a new loan.
In short, if you want to get credit in the future, you must repay your loan on time. If you miss an EMI payment, you will not only have a lower credit score, but you will also have to pay the penalty. When applying for a loan, ensure that the amount is within your means to repay and that the repayment term is also flexible. However, unexpected events may jeopardize your ability to repay. Rather than abandoning your lender, look for a plan that allows you to make consistent online EMI payments. It will help you build a better credit history and provide you with more and better borrowing options in the future.
MobiKwik’s fast and secure payment process makes your Muthoot finance online payment easier than ever. So, why wait? Pay using online platforms and level up your credit score.