3 reasons why you should pay your loan EMIs on time

3 MinsJune 22, 2020

Today it is possible to take a loan for almost any need. From secured loans such as a home loan or a car loan or two-wheeler loan which are meant for specific purposes, to an unsecured loan that has no defined end-use. Then there are education loans for those wanting to pursue higher studies, wedding loan for those who want to tie the knot, or holiday loans for those bitten by the travel bug.


But the option to avail credit should be exercised responsibly. Or else you may find yourself struggling to pay the EMIs (Equated Monthly Instalments). If you miss or delay any EMI you will be charged late fee as well as penal interest. In the worst-case scenario, the bank may seize or take over your asset, in case of collateralised loans such as home loan, car loan or loan against property. Not to mention the negative impact on your credit score and credit history, which can have repercussions in the future.

Let us see what the benefits of paying your EMIs on time are:

Save on penalty

  • By paying your EMI on time you can avoid the penalty or late payment fee that banks charge. The penalty is usually a certain percentage of the EMI amount.This will increase your financial burden.

Positive impact on credit score

  • Paying your EMIs on time ensures your credit score remains high and is positive for your credit history. This is given the highest weightage in a borrower’s credit score.
  • It is an indication that you as a borrower are creditworthy and prompt with your repayment and hence, borrowing in future becomes easier.
  • When you apply for another loan or credit card the bank will consider your higher credit score and may sanction your loan faster or approve a higher loan amount.

[Also Read: 10 Tips to get the Right Home Loan Offers]

Easier to get top-up loans

  • Getting a top-up home loan is easier if you are regular with your home loan EMIs. As the interest rate on a top-up home loan is the same as a home loan, it becomes a cost-effective way of borrowing for any purpose, as compared to an unsecured personal loan. You can also use Axis Bank's home loan EMI calculator.

If you had opted-in for Moratorium

The Moratorium facility recently offered by banks, based on Reserve Bank of India guidelines, is aimed at providing short-term relief to borrowers who may be facing pressure on their finances. If you have opted-in for the Moratorium, you are spared from paying the EMIs on your term loans for the June to August 2020 period. The late payment fee is waived off and there is no negative impact on your credit score and report. But remember, the interest during the Moratorium period has not been waived off. It will get added to your principal amount and cause loan tenure to extend. Hence, post the Moratorium, it is important to ensure that your repayment is back on track and you continue to pay your EMIs regularly, so that you can enjoy the benefits mentioned above.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.