There are many good reasons never to pay late debts, but are there good reasons to pay them back in advance?
It seems to be against common sense to send a payment well in advance of the due date, but the more you understand how debt interest works, you will find it may be a smart idea in some circumstances.
To show you this, here are four advantages you might consider paying off your debts in advance!
Save money on interest rates
When you have a balance on your credit card account, such as installment purchases, or loans in your name, these debts accrue interest every day.
Therefore, when you make a payment before the due date, you are reducing the average daily balance, which can significantly reduce interest expenses.
Also, think of it this way: Because you earn very little (or nothing) in keeping money in a checking or savings account, but you may end up paying a lot more for a “down payment” debt, you can save money in the long run by making payments. advance whenever possible.
Improve your credit score
Every citizen has something called a credit score. The word “score” comes from English and means punctuation. That is, this is a credit score that everyone has that represents how well paying a person is.
This number is used by financial institutions to evaluate the granting of credit services, such as increasing your card limit, financing, among others.
By paying off your debts in advance, you can increase your score, and with it, you can get approved on better personal loans or other services.
By making an advance payment, you are committing your funds to repaying your debts, rather than simply planning to do so in the future. That is, you eliminate the risk of spending money on other things. This is especially beneficial for those who receive extra money they were not expecting.
Often without good financial planning, we end up spending money on things that are not as essential, and tightening up when the due date of the debts arrives. By paying debts in advance, you ensure less headache and more peace of mind.
Release your credit line
For credit cards, paying bills in advance helps you clear your limit. This is interesting for those who want to make larger purchases in the coming days and do not want to worry about not having their order approved on time.
For loans and financing, however, by repaying the installments in advance, in addition to being more relaxed, you can also have your credit line released to get new products, according to your financial needs.
Now that you know what happens when you pay your debts in advance, you are probably ready to move on. In many cases, it’s as simple as finding ways to have extra money – either to pay off your debt all at once or to pay just a little more each month.
For loans and financing, it is important to call your lender first and ask how to do this so that your payments are properly credited to your account and so you know exactly how much to pay.