What are the Benefits of Paying EMIs on Time?
Loans and EMIs have significantly improved our access to financial dreams. From home loans to personal loans, anything is possible. EMIs on electronics and gadgets further reduce the financial burden. With India’s growing credit-driven consumption, maintaining a good credit score is necessary.
In this blog, we will talk about the importance of paying EMIs on time and its impact on our financial credibility.
5 Benefits of Making On-Time EMI Payments
There are several benefits to paying your EMIs on time. It solidifies the relationship between you and your lender, making you a trusted individual for future loans. Here are 5 advantages of good credit behaviour:
1. Improve Credit Score
Your credit history determines how trustworthy you are as a borrower. Therefore, timely payments ensure that your credit score shoots up. It also creates a positive credit history, making you eligible for future loans and EMIs at competitive interest rates.
2. Lower Interest Rates
Financial institutions give higher weightage to the borrowers who pay their EMIs on time and without any delay. Therefore, you may be eligible for lower interest rates on future loans. This is because timely payment paints your charaterstic as a reliable borrower. Moreover, you may be eligible for other lending products along with other perks such as gift cards, cashback offers and more.
3. Avoid Unnecessary Penalties
As banks, nbfc or any financial institution do not find defaulters trustworthy. Furthermore, failing to pay EMI on the due date leads to legal action and heavy penalties. There are charges deducted by the lending institutions in case of NACH bouncing, cheque bouncing, penal charges etc. [AJ1] Therefore, it adds to your overall repayment amount, further creating burdens.
4. Avail Add-on Options
Timely loan repayments make you eligible for any top-ups you may require. It is available for all kinds of loans, whether personal, add on quantum (loan) on existing asset or student loans. Other lending institutions will be ready to take over existing loans or provide addon quantum for other needs of the customer with better rate of interest. [AJ2] The add-on feature lets you access various perks if you exercise EMI payment discipline.
5. Reduced Financial Stress
Paying EMIs on time lets you be worry-free about your financial situation. You do not have to worry about your credit score or history and you can enjoy building up your savings. Eliminate your financial stress and build strong customer relations through timely payments.
Tips to Maintain Your Credit-Worthiness
You know why paying your EMIs on time holds so much value to your financial health. However, you may feel overwhelmed navigating the process. Here are effective tips for loan eligibility improvement.
● Avail Autopay Facility
Most online payment apps allow an autopay option. You can enjoy stress-free EMI payments with the autopay set-up. Simply go to your online payment app and click on set up autopay. It will let you set a date and time for your EMI just to avoid the missing of EMI despite having balance in your account.
● Choose the Right EMI Option
One of the most common mistakes people make is to avail unsuitable EMI tenures. Assess your financial situation before choosing an EMI tenure. This will help you plan ahead of your due date and enjoy timely loan repayment advantages.
● Maintain Income to EMI Ratio
Your income-to-EMI ratio should be between 40% and 50% of your monthly income. This means that 40% should be dedicated to paying off EMIs and loans. A higher income-to-EMI ratio will always lead to default in EMI sooner or later.
● Create an Emergency Fund
Life can be unexpected. Always ensure you have a backup plan before opting for a loan. Start by building an emergency fund. This can help you make timely payments in the face of adversity.
● Opt for optimum Tenure suitable to your cashflow
Always choose Installment timeline i.e. monthly, quarterly, half yearly etc. that align your cashflow for better financial stability. For example, customer having farm income should opt of quarterly or half yearly installments aligning the crop income. Further, select loan tenure that balances affordability (in terms of Rate of interest) and convenience.
● Consolidate Existing Debts
Are you finding it hard to track all your loan repayments? You can streamline them all in one single payment. This lets you view how much you owe each month together and creates a hassle-free process.
What are the Consequences of Not Paying EMIs on Time?
More and more people in India depend on EMIs to achieve their dreams. As we move forward into the latter part of the decade, maintaining good financial health is crucial. Are you wondering what happens if you miss your EMI payment? Here are the consequences of not maintaining good credit behaviour:
● Limited Access to Credit
If you fail at paying EMIs on time, you risk limiting your credit options. Not only does your credit score get affected, but you may also become ineligible to get new loan of any type.
● Higher Interest Rates
Not maintaining a good credit score can also impact how lenders behave towards you in future. When you apply for a loan, financial institutions run a credit history check to see whether you paid your outstanding debt on time. Therefore, lenders may charge higher-than-usual interest rates and offer lower loan amounts.
● Far-Reaching Consequences
Apart from impacting your credit score, not repaying loans on time can even impact other aspects of your life. For example, renting may become a hassle as landlords run a credit check before approving. A lower credit score can entail higher security deposits.
Moreover, you may miss job opportunities, and employers may assess your financial responsibility.
Therefore, paying your EMIs on time is an absolute necessity in 2025. Are you wondering how to manage your loans and EMIs and maintain your credit score at the same time? Let us discuss essential tips for the same in the next section.
Final Thoughts
Now you know the perks of paying EMIs on time. By building your financial health, you increase your creditworthiness and build long-lasting customer relations. Are you thinking about securing a loan? Kogta Financial offersextensive loans on cars, HCVs and tractors. The best part? Pay your EMIs directly through our website!
