When you use a credit card, or ask for a personal loan (or similar) you must meet the monthly payments to avoid damaging your credit history. If you are a good payer, you will soon get many benefits, such as being a candidate for future major loans.
In addition to not delaying the installments, there are two more ways that will help you to be a good payer: advance payments and advance payments. Learn more about both!
What is prepayment?
If you have money to pay a debt, ahead of time, you can make an advance payment. This will help you as follows:
1. To reduce the capital that was lent to you, which will allow the interest rate of the initial loan to decrease.
2. To change the payment dates, as well as reduce the commissions of the entity that has lent the money.
When opting for prepayment, it is possible to choose between reducing the amount of the installment (maintaining the same months of the loan) or maintaining the amount of the installment, reducing the initial number of months.
Suppose you have taken out a loan of 3,000 dollars to pay in 10 installments of 300 dollars and have already paid the first two months (regardless of interest). Which means we would have to pay 2400 dollars. If you opt for prepayment and pay a total of 900 dollars (the equivalent of 3 installments), you would be owing the bank 1,500 dollars
The previous figure could:
1. Pay well in 5 installments of 300 dollars (keeping the initial monthly figure, but reducing the missing months).
2. You could pay 187.5 for the remaining 8 months.
What is the advance of fees?
In the case of advance payments, what happens is that some months of the debt can be paid before date. Thus, for example, if you had a debt that you had to pay from January to October and choose in March to advance the payments of April and May, you can delay the payments of the following installments until June since the previous two months would already be paid.
Unlike with advance payment, the advance payment does not mean interest reduction because the initial amount borrowed is not reduced.
Some extra data…
Remember that to access the right to make advance payments as well as to advance payments you must meet your debts. In addition, opting for any of these types of payment does not represent additional costs.