Importance of Paying Your EMIs On Time
Top 4 Benefits of Paying Your EMIs on Time
Missing a loan EMI payment even for 1 day can harm your credit score and trustworthiness to future financiers. When you pay your EMIs on time, it shows your ability to pay off loans and builds trust. This increases your chances of getting future loan approvals at competitive interest rates.
The majority of banks and financiers evaluate your credit history before approving your application for new loans 一 be it a vehicle loan, car loan, or business loan. With a good loan repayment track record, you can get hassle-free loans at lower rates.
However, that is not the only benefit of paying your EMIs (equated monthly installments) on time. There are several other benefits, including:
1. Improve Your Credit Score or CIBIL Score
Paying your EMIs on time can help build a positive credit history and boost your credit score. This makes borrowing easier (be it loans or credit cards) in the future and at better interest rates.
On the other hand, defaulting on your EMI payments will make you fall into a debt trap and cause a substantial decrease in your credit score. Future financiers will see you as a risky borrower, making it difficult to secure future loans.
2. Avoid Late Fees and Penalties
If you fail to pay your EMIs on time and default on your loans, you will face serious consequences, including hefty late repayment fees and penalties. This can lead you to a serious debt trap that’s often hard to escape.
For example, in case of missing a car loan EMI, you will need to pay 3% per month of the total amount due (your overdue EMIs) as per our schedule of charges for a car loan.
3. Avoid Legal Actions
If you miss your EMI, the creditor may send recovery agents to your place to collect the owed amount. This can lead to unpleasant situations and stress for you and your family.
If you continuously fail to pay your EMIs on time, the creditor will also have the legal authority to seize your purchased goods. For example, if you miss your car loan EMIs for 3-4 months, the creditor may seize your car, leading to a complete loss of money that you paid as a down payment and as EMIs to date.
The creditor can also take legal action against you, which will lead to court proceedings. The court will decide how to make up for the lender’s loss.
To avoid the consequences of defaulting on your loan, you can:
● Talk to your loan provider in advance and request them to reduce your EMI amount by increasing the tenure of your loan.
● Take a top-up loan on your car loan or other loan to get an additional surplus for a short time.
● Consider refinancing your loan with a creditor who charges lower interest rates than your existing one.
● Manage your finances in advance to ensure you always have an extra EMI in your bank account.
4. Build Trust with Your Loan Providers and Get Incentives
Paying your EMIs on time can help you build a long-lasting relationship with your financier. This can make it easier to get better loan offers in the future.
Creditors may also offer incentives or discounts to borrowers who have a history of paying back their loans in time. You can also enjoy faster loan processing in the future.
Conclusion
By paying off your loan EMIs in time, you can reduce financial stress and live a more peaceful life. Moreover, it will help improve your overall financial health and build a good credit history.
With this, you’ll be able to:
● Get new loans faster and at better interest rates.
● Apply for top-up loans on your existing loans (when required).
● Build more assets with hassle-free loans over time.
Want to buy a car to upgrade your lifestyle or finance your small business to meet peak-season consumer demand? Locate and visit our nearest branch to get a loan that meets your financing needs and repayment abilities.
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