What You Need to Know About Paying Off Your Personal Loan
Taking out and repaying a personal loan is an important financial responsibility that can affect one’s credit for years. Since personal loans can have a significant impact on your credit score, it’s a good idea to be as careful as possible when it comes to repaying your loan.
If you’re in the process of repaying a personal loan, there are a few important matters to keep in mind. Read on for four tips about repaying your personal loan.
1. You Should Call Your Lender if You Need Help
Some lenders can provide temporary loan accommodations to help customers manage difficult financial situations, such as the loss of a job or income. While terms and/or specific eligibility criteria will vary, the most common loan modifications include payment deferment and forbearance, which generally allow borrowers to delay payments for a set time period. These loan accommodations can also help protect your credit score, as long as you adhere to the new loan agreement (including resuming payments, as scheduled).
2. Responsible Loan Repayment Can Improve Your Credit Score
Making on-time loan payments is one of the best ways to improve credit scores over time. Credit usage has the biggest impact on credit scores for two of the largest consumer credit reporting agencies. However, it’s important to note that poor loan management, including late and/or missing payments, can also lower one’s credit score.
While credit mix has a smaller impact on credit, responsible usage of different types of credit, including a credit card, line of credit and/or personal loan, may slightly improve credit scores. Keep in mind that multiple forms of credit are not necessary to improve or maintain a good credit score.
3. Automatic Payments Can Save You Time
If you have room in your budget, setting up recurring or automatic payments is a simple way to save time on regularly scheduled loan payments. Doing so can also help improve your credit history with on-time payments. If possible, set up automatic payments through your bank/lender to ensure you never miss a due date.
4. You Can Save Money by Prepaying Your Loan
While prepayment isn’t possible for all borrowers, repaying your loan prior to the end of the loan term can help save you money. If your loan contract allows, you can save money on interest by paying off your full loan amount early. Keep in mind that loan terms and fees, if any, will vary by lender.
Did you know? NetCredit personal loans carry no prepayment fees. That means you can repay your loan before the loan term date to save money on interest, if your financial situation allows.
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.
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