The average Indian customer is showing an increasing affinity toward purchasing items on EMIs. This is due to the ease of access to easy loans and EMI options, thanks to the popularity of e-commerce and digital financing options for consumers. According to Indian finance experts, different types of EMI payments increased by 220% in July 2021 compared to February 2020.
While taking an EMI is easy, paying it off in a timely manner is not. It requires good financial planning and discipline to stick to the payment schedule, ensuring that no EMI payment is missed. So, if you find it difficult to put money aside each month to pay for the EMI, remember that it helps you avoid falling into a debt trap.
There are some tried-and-true methods to ensure that your EMI payments are always made on time and in full. Let's begin with the benefits of paying EMI on time.
Paying your EMIs on time has advantages!
It is, of course, obvious that paying your EMI on time minimises the loan burden and moves you one EMI closer to loan repayment. That is not all. Here is a list of benefits.
1. Enhances your credit history
Your credit history influences your loan approval and amount, and even the interest rates. Paying an EMI on time shows your creditworthiness, which increases your chance of getting a loan in the future at a competitive interest rate. The bank usually considers a good credit history before approving your application for new loans. If you have a good credit history, you may be eligible for a bigger loan.
2. Allows you to avoid the fine
Borrowers who fail to make their EMI payments or default on their loans face serious consequences. Your creditor has the legal authority to seize your purchased products. For example, if you consistently fail to make EMI payments for a car loan or a bike loan, your vehicle is taken away. In addition, they may impose a significant penalty on loans. Penalties are often calculated as a percentage of the total EMI. Paying instalments on time will prevent you from having to deal with any of these unpleasant situations and bring the best EMI benefits.
3. Possibility of taking an add-on loan
In this case, the borrower is given an additional loan amount in addition to the original loan amount. Personal loans, home loans, and business loans all have this option. If you pay your types of EMI payments on time and have a good credit history, you can get a new loan to top up your current one.
4. More room to take up loans
Lenders may be more willing to lend to borrowers with a proven track record of timely repayment. Depending on your lender, you may receive offers only during certain times of the year or at any time. Do not be surprised if you receive low-cost loan offers if you pay the loan EMIs timely for an extended period. High credit limits, shopping cards, and gift vouchers are all possibilities from your lender. All of this allows you to accommodate more loans as per your requirement, and that too at better interest rates and offers.
Paying your EMI on time: Some tips
Now that you are aware of the advantages of making timely EMI payments, you will want to know how to do it consistently. You will never miss an EMI again if you follow a few simple guidelines and plan ahead of time.
1. Make a financial plan.
If types of EMI payments are putting a strain on your monthly budget, it is time to cut back on unnecessary spending. Expenses for nightclubs, movies, and fine dining are all examples of frivolous spending that should be avoided. You should also avoid using credit cards whenever possible. If you use a credit card, you will pay more in interest and end up with more debt.
2. Make the most of your financial commitment.
You can even use PPF or life insurance policy as collateral to get loans from a financial institution. After the third investment year, the PPF allows investors to borrow against the remaining principal. It is necessary to return the same amount of money within three years. You can also take money out of your mutual funds or a savings account to pay your debts. Liquidating your investments and paying off your debts is a better option in some cases. For instance, if your FD is paying 8% interest and the interest rate on your loan is 15%, it would be wise to pay off your EMIs with your FD.
Bottom Line
Before taking a loan, think about your monthly financial commitment. Never, under any circumstances, let your monthly EMI exceed 50% of your gross income. You never realize when an unforeseeable event will impact your ability to repay your debts.
It is wise to improve your credit history and open the door to future borrowing opportunities by taking advantage of timely payments.
For more details, you can connect with Bajaj Finserv executives to get your queries answered regarding EMIs. Simply reach out to us at https://www.bajajfinserv.in/reach-us.
