EMI stands for equated monthly instalment and is the amount you pay per month towards repaying your personal loan, home loan, car loan, or any other loan. To maintain good financial and credit health, it is important for you to pay these EMIs on time. In case you fail to do so, there could be many repercussions.
In this brief guide, let’s understand the importance of timely loan repayments and learn tips for loan management that can help you make timely EMI payments.
5 Benefits of Timely EMI Payment
- Maintain Credit Score:
Your credit health is based on many factors, including your monthly loan repayments. When you make your loan EMI payments on time, you build creditworthiness, and this helps in maintaining a good credit score.
- Avoid Late Payment Fees and Penalties:
If you miss out on paying your monthly EMI, you may attract late payment fees and penalties. These charges can take a toll on your pocket. So, by paying your EMIs on time, you can avoid such struggles and lead a balanced financial life.
- Build Trust With Lenders:
There is no doubt that when you clear your payments on time, you build trust with the lender. So, meeting these EMI obligations would not only enhance your reputation but also increase the chance of future loan approvals.
- Easy Access To Credit Options:
As mentioned earlier, timely EMI payments help you build a good credit score. Now, when you have a commendable credit score, you can easily get loans in the future as the lenders would trust your creditworthiness while approving your loan. Moreover, you may also increase the chance of getting a personal loan, home renovation loan, car loan, etc. at a better interest rate.
- Reduce Stress:
Of course, the more you clear your debt, the less stress you have. So, follow this simple principle and live a peaceful life. This payment discipline would surely reduce your financial stress and allow you to have peace of mind.
Also Read – Top 8 EMI Mistakes You Must Avoid
7 Tips to Make Timely EMI Payments
- Make sure to set payment reminders. You can use calendar alerts or mobile apps to remind yourself of the date when you need to pay your EMI.
- Create a budget and make a financial plan around it.
- Unless it is an emergency, you must make EMI payments a top priority. You should always allocate funds for your monthly payments so that you do not face cash flow issues.
- You can also consider paying advance EMI for your loan whenever possible to manage your finances more effectively.
- In case you are unable to make timely EMI payments, you should communicate this to your lender. They may offer alternative repayment options or temporary relief measures.
- You should also regularly check your bank statements to ensure that EMI payments are deducted correctly.
Also Read – How to Reduce EMIs of Your Existing Personal loan
Paying your EMIs on time is crucial to be able to avail credit easily in the future. Any delay in loan repayments will negatively impact your credit health. Hence, ensure that you apply for a loan amount within your means and with flexible repayment terms.
FAQs
1. Is it good to pay EMIs early?
Yes, paying your EMIs early can be a good idea. It helps you save money on interest because the loan gets paid off faster. It also improves your credit score.
2. What happens if I pay all EMI at once?
If you pay all your EMIs at once, you will be paying off your loan early. This can save you money on interest because the loan ends sooner. However, some lenders might charge a fee for paying off the loan early. Hence, it is important to check your loan agreement before paying all EMIs at once.
3. Which is better: EMI or full payment?
Deciding between EMI and full payment depends on your situation. Paying with EMIs lets you spread out the cost over time and this makes it easier for you to manage your money. On the other hand, paying in full means you finish the loan faster and save on interest. Check what’s best for you before come to a conclusion.
4. What happens if I do not pay EMI on time?
If you do not pay your EMI on time, you will have to pay extra fees and penalty charges. Missing payments repeatedly can also lower your credit score and lead to more serious problems, like legal action from the lender.
