15 Dec 2020 | 5 min read
Understanding how to repay a loan smartly will not only save your time, but will also help you to save a greater portion of your hard-earned money. Depending on your financial standing, you can choose the loan repayment method to pay off your loans.
Loan repayment reduces your debt obligation, improve the CIBIL score, and enables you to build your financial stability in a significant manner. Below, we have stated the different methods of loan repayment, do have a look at them to easily pay off your loan!
Equated Monthly Instalments
EMI is the most well-known credit repayment method. Each portion includes a part of the principal and a part of the interest, which is scheduled to be paid every month over a fixed period.
Having said that, a few banks permit their borrowers to prepay the loan after a specific number of instalments have been made. A few banks may charge a pre-payment fee if you are willing to pre-pay your loan.
With some loan products, you get the chance or option to repay the loan through the bullet loan repayment method. With this option, you have to pay just the interest segment every month. At the point when the loan tenure ends, you have to make one shot repayment that pays off the whole principal loan amount.
During the loan period, the right mode of repayment can make it convenient for you to pay off the loan. The following are modes of repayment of the loan for the convenience of the user:
Equal monthly loan instalments and SIP investments are also carried out using the ECS mode. This is used for the purposes of debt as well as credit. It allows the debiting of the customer's account on a given date and is available in all major cities.
In exchange, this significantly decreases the use of paper tools and increases the performance of procedures and customer satisfaction. There is no restriction on any payment size.
NACH is targeted at repetitive interbank transactions of high or low volume debit/credit. This method facilitates the execution of transactions in real-time mode. NACH is being extended to include more than 82,000 bank branches on a nationwide network. It's also expected that this unified payment system will consolidate the various ECS systems and help to eliminate local barriers.
The payer or the bank will avoid such PDCs, creating difficulties for the one who has to collect the payment from the same one. Conversely, in the event of non-receipt of the goods, the payer can also avoid the payment.
Often, this directive is also known as the Debit Mandate or Banker's Order. This facility is used to pay for mortgage, rent or other fixed payments since the variable bill sum is typically not appropriate for payment.
To sum up, loan repayment must be considered before availing of any sort of loan as that is one will be required to carry out throughout a specific term. In addition to the fact, they reduce your loan obligation and interest accrued, they are additionally reflected in your credit record.
Defaulting on loan repayment can result in a higher interest rate or bankruptcy if it gets severe. There is also a long-term implication on your credit well-being which is reflected on your credit record.