If you own a credit card, it is natural for you to have a loan, if not lots of it. Usually, banks are said to be ‘helping out’ their customers to pay off their credit card debt by letting them pay the minimum fees.
What are minimum fees, by the way? To those who didn’t know, minimum fees are the small percentage of your debt that you bank or creditor requires you to pay in a monthly basis. This can either be 2% or 4% of what you owe, depending on the bank or creditor that approved your loan.
For most of us, it’s very charming to know that since they’re not demanding you to pay the whole amount of your loan in full; you can take control of your finances until you eventually pay off your debt. However, there are benefits for those who are paying more than what was required; some of those are written here:
- The Loan or Debt gets paid much faster. The truth is, those who pay only minimum of their total loan loses more than what they owe due to the fact that since there are other bank charges besides your loan, only a little of what you paid is credited and subtracted in your loan balance. On the other hand, those who paid more will have their balance getting smaller.
- Additional Interests will be lessened. To those who don’t know, your remaining debt also accumulates interest. That means that the longer your loan or debt stays, the higher the interest will be. That’s why whenever you pay a minimum of your debt, most of your monthly payment only goes to the accumulated interest and the remaining amount is the amount that is lessened in your total balance.
- It will be easier to borrow again when the need arises. If you’re interested to know, banks and creditors are doing some kind of a credit score system. The faster you have paid off your loan or debt, the easier for you to borrow money from them next time. Your overall credit rating can affect not only your personal reputation but also the amount of money that you can borrow in your next loan.