Understanding the term bank credit?
A bank credit is a type of debt. It takes into consideration the amount one is able to borrow from the financial institutions. Bank credit determines how much one is able to borrow after taking into consideration the assets and the credit history.
Step 1
How bank credit works
Since bank credit takes into consideration the ability of one to borrow. It tends to be different compared to a line of credit. Bank credit deals with loans that are taken for a specific purpose and they involve collateral which ensures that the loan is repaid even if one defaults. Banks expect that when a certain loan is approved it should be repaid plus interest. So it is important to look at the financial status of the borrower which may include stock accounts and savings, employment status, annual salary and property.
Paying back bank credit
Paying off your bank credit early is the best way to save a lot of interest charges. There are a number of ways to pay back your credit early enough depending on the money you have and what the terms say. You can put in more money to the principal amount, make use of your savings or making weekly payments.
The first step to paying back bank credit is compiling the current loan balance, the remaining months and the interest rate. Basically this is the information you need to make use of an online debt calculator.
Secondly check if you have a precompiled interest loan or a simple interest loan. This is because paying for a simple interest loan will save you money when paid early. For the precompiled loan the interest is already calculated and so it won’t save you any money but will decrease your debt.
It is also important to review your loan contract to know whether there are any penalties for paying early. This will help you in knowing if the amount you ought to save by paying early offsets the charge you would have incurred.
You should also find out if additional funds apply for paying more than the minimum payment. You should instruct the bank to make use of any additional funds to paying the principle amount. You can also calculate the amount needed to add to the payment of the loan and then find ways of cutting down costs and directing the funds to the loan account.
It is also important to make payments weekly as this will ensure that you inject additional money into the loan account as well as saving on the interest. You should also make use of your savings account by determining whether there is additional money you can use to settle the bank credit if you discover you have enough to pay the loan then it’s up to you to decide whether to pay the whole amount and stay without liquid cash compared to being in debt. You can just contact your bank to give you a payoff amount. Once the loan is settled the bank will send you a full statement of your account.
Tips to getting the right rates
Do some research before applying for a bank credit in order to get the right rates that will not stress you when repaying the loan?
