5 key advantages of setting automatic payments for personal loans

Managing personal loan repayments can be a daunting task, especially when juggling multiple financial commitments. One effective strategy to streamline this process is setting up automatic payments. Automatic payments, also known as auto-debits, allow borrowers to authorise their bank to make regular payments towards their loans automatically. 

This simple yet powerful tool offers several advantages that can significantly benefit borrowers. Here, we explore five key advantages of setting automatic payments for personal loans.

1. Ensures Timely Payments

One of the most significant advantages of automatic payments is that it ensures timely payments. By automating your loan repayments, you eliminate the risk of forgetting a due date, which can lead to late fees and penalties.

Improved Credit Score

Timely payments directly impact your credit score. Consistently making on-time payments can help improve your credit score, reflecting positively on your credit report. A higher credit score can open doors to better loan terms and lower interest rates in the future.

Avoid Late Fees

Late payments often incur additional fees, which can add up over time and increase the total cost of your loan. By setting up automatic payments, you ensure that payments are made on time, avoiding unnecessary late fees and keeping your loan costs down.

Read more: What is the processing fee on personal loans?

2. Simplifies Financial Management

Managing multiple due dates for various bills can be overwhelming. Automatic payments simplify financial management by reducing the number of tasks you need to handle each month.

Streamlined Process

With automatic payments, you only need to set up the payment once, and the system will handle the rest. This streamlined process reduces the administrative burden and allows you to focus on other important aspects of your financial life.

Consistent Budgeting

Knowing that your loan payments are automated helps with consistent budgeting. You can plan your finances more effectively, knowing that a fixed amount will be deducted from your account each month for your loan payment.

3. Potential Interest Rate Discounts

Some lenders offer interest rate discounts to borrowers who enrol in automatic payments. This incentive is designed to encourage responsible repayment behaviour and reduce the lender’s risk.

Lower Interest Rates

By taking advantage of these discounts, you can lower the interest rate on your loan, reducing the overall cost of borrowing. Even a small reduction in the interest rate can lead to significant savings over the life of the loan.

Financial Incentives

Lenders may also offer other financial incentives, such as reduced fees or cash back rewards, to borrowers who set up automatic payments. These incentives can further enhance the benefits of automating your loan repayments.

Read more: Top 7 benefits of personal loans you must know

4. Reduces Stress and Anxiety

Financial responsibilities can be a major source of stress and anxiety. Automatic payments can help alleviate some of this stress by ensuring that your loan payments are taken care of without constant oversight.

Peace of Mind

Knowing that your payments will be made on time every month provides peace of mind. You can rest easy knowing that you are meeting your financial obligations and maintaining a positive relationship with your lender.

Focus on Other Goals

With automatic payments in place, you can focus on other financial goals, such as saving for retirement, investing, or building an emergency fund. Reducing the mental load associated with managing loan payments allows you to concentrate on long-term financial planning.

Read more: How to choose the best personal loan lender?

5. Environmentally Friendly

Setting up automatic payments also has environmental benefits. By reducing the need for paper statements, checks, and mail, you contribute to a more sustainable and eco-friendly financial management system.

Reduced Paper Usage

Automatic payments eliminate the need for paper bills and checks, reducing paper consumption and waste. This small step can have a significant impact on the environment, especially when adopted by a large number of people.

Lower Carbon Footprint

By minimising the need for physical mail, you also reduce the carbon footprint associated with transporting paper bills and payments. Embracing digital payment methods supports a greener, more sustainable future.

Read more: How to close a loan and what are its benefits?

Frequently Asked Questions (FAQs)

1. How do I set up automatic payments for my personal loan?

To set up automatic payments, contact your lender or log into your online banking account. You will need to provide your bank account details and authorise the lender to debit the payments automatically. Most lenders offer easy-to-follow instructions on their websites or through customer service.

2. Can I change the payment date for my automatic payments?

Yes, most lenders allow you to change the payment date for your automatic payments. You may need to contact customer service or make the change through your online account. Be sure to confirm the new payment date and ensure it aligns with your budget and cash flow.

3. What happens if there are insufficient funds in my account?

If there are insufficient funds in your account, the automatic payment may be declined, resulting in a missed payment. This can lead to late fees and potentially harm your credit score. To avoid this, ensure that you have enough funds in your account to cover the payment on the scheduled date.

4. Can I cancel automatic payments if my financial situation changes?

Yes, you can cancel automatic payments at any time. Contact your lender or log into your online account to stop the automatic payments. It’s important to continue making manual payments to avoid missing due dates while you manage your financial situation.

5. Are there any fees for setting up automatic payments?

Typically, there are no fees for setting up automatic payments. In fact, some lenders offer financial incentives, such as interest rate discounts, for enrolling in automatic payments. However, it’s always a good idea to confirm with your lender if there are any associated fees.

6. Will automatic payments work if I switch banks?

If you switch banks, you will need to update your payment details with your lender to ensure that automatic payments continue without interruption. Contact your lender and provide the new bank account information to avoid missed payments.

Looking to apply for an instant personal loan with low interest rates and easy repayment options? Apply for your next personal loan from Airtel Finance, via the Airtel Thanks app. Less documents, greater eligibility, seamless process and more.

Setting up automatic payments for your personal loans can provide numerous advantages, from ensuring timely payments to reducing stress and contributing to a more sustainable environment. By automating your loan repayments, you can manage your finances more efficiently and focus on achieving your broader financial goals. Embrace the convenience and benefits of automatic payments to enhance your financial well-being.