Getting a loan is so beneficial as you will solve all the financial challenges you have at that time. Before you contemplate taking a loan, you must consider the institution you are getting the loan from. Another thing is your credit score. Does your credit score allow you to get the financial assistance you want?
If yes! Then you can go ahead to get the loan. But repaying is crucial as late repayment will lower your credit score, reducing your chance of getting a loan next time. Suppose you are looking for a same-day or cash advance loan, consider an online loaning platform.
So, how do you repay your loan quickly while improving your credit score? Continue reading to learn more.
Paying the Loan on Agreed Date
Once you receive your loan, be it personal, home loan, etc., the best thing is paying on time. This helps so much in improving your credit score. You might be thinking that you can delay repaying your loan by a day or two, but it will hurt your credit score for your information.
By doing so, you might be limited and not get a loan for a specified period. In case you are unable to repay your loan on time. Inform your creditor and arrange the date or method you will repay the loan. This will help you from having a low credit score.
Making Extra Payments
Do you have surplus cash that might be hanging around? If so, you might use that cash to make extra repayments for your loan. By extra repayments, you will lower the interest and allow you to clear the loan early.
Don’t stick to monthly repayments. It is also good to make extra repayment. This will boost your credit score and build a strong relationship with your creditor.
Loan Refinancing
This might not sound well to you, but it is the best method of repaying your loans faster. By refinancing, you take another loan with a low-interest rate but eventually paying off the past loan. Loan refinancing helps you cut off the repayment amount and paying off the existing loan within a short period.
When you do this, you get to improve your credit score. Many creditors allow loan refinancing and give their customers low-interest rates. For example, if your current interest rate is 6% when you refinance, the rate will decrease to about 3%.
This depends on your creditor but in all cases refinancing leads to low-interest rates.
Redraw Facility
Are you paying off your home loan? Then to save, you should consider using the redraw facility. The redraw facility allows you to repay the principal amount. But this works when you have been making extra repayments. This will reduce the interest charged, thus helping you to boost your credit score.
It doesn’t lower the interest rate only and gives you the flexibility to repay your loan even if you have financial challenges during the repayment period. This might seem so right, but some lenders take time to authorize the redraw facility’s repayment and may also charge you.
Offset Account
This is a financial account connected to your home loan. The best thing if you have an offset account is that you can deposit or withdraw cash. This type of account is more of a saving account. Having an offset account helps reduce the interest rate charged on your home loan.
Pay Your Bills
How does paying my utility bills affect my credit score? This is not even close to any loan that you know. But for your information paying your bills on time and regularly helps increase your credit score.
This information will not appear on your credit report, but creditors get information on whether you have any outstanding bills. So, be it water, electricity, internet, or any other utility bill, make sure you pay on time.
Avoid Applying for Various Loans
Yes! You are in a position to pay off your loans on time. But do you know that you are decreasing your credit score? When you apply for loans frequently, you will be indicating that you have financial issues.
This shows creditors that you don’t have the financial discipline and get to lower your score. This doesn’t apply for loans only but also when you sign up for different credit cards too. Financial experts advise that you get to talk to a lender before you make a loan application. They will help you and secure your credit score.
Check Your Credit report
You need to check your credit report before applying for a loan. Go to your creditor and ask for your credit report. This will help you know if you qualify for a loan or not. What you should understand is that you can only get a credit report once every year or sometimes after ninety days after getting your first credit report.
By checking your credit score or report, you will get to know if there are any errors. Many individuals tend to assume this and get penalized for a mistake they didn’t commit. So, always crosscheck your credit report and highlight any issues that might be in the information.
Suppose you notice any error inform your creditor or credit reporting agency for assistance.
Stick to One Job and Home
Changing jobs and homes is a typical scenario, and many people don’t care about that. But creditors do care about such situations. To show your ability to pay your loans, the creditor checks your job and where you live in a certain period, let’s say the past five years.
Suppose you have been shifting from one house or job to another. The creditor will conclude that you don’t have a stable income. Therefore, even though you can pay off your loans, always stick to one job and home. This indicates financial stability.
Conclusion
Repaying your loans is crucial as it is a huge factor when it comes to your credit score. Therefore, use the above tips to pay off your loans while boosting your credit score regularly.
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