How Loan Repayment Timing Impacts Your Future Offers – Proven Patterns?

Ishanvi is a 33-year-old software engineer. She decided to close her personal loan of ₹3 lakh early. She had 18 EMIs remaining. However, she opted to repay the remaining ₹1.25 lakh in one lump sum.

After three months, she noticed something very interesting. She discovered that her credit score had increased by 40 points. Also, she started receiving pre-approved car loan offers with lower interest rates than before.

It is not just a coincidence. It was the timing of her repayment that made a difference. The way and when you repay your loan have a direct impact on the kind of loan deals you may get in the future.

Why Timing Of Repayments Makes A Difference?

Your credit score is not only about if you can repay. But it also shows how consistently and strategically you manage your repayments.

Key Highlights:

• If you are paying on time then it shows your financial discipline and boosts your reputation with lenders.
• If you are missing EMIs or delaying your payments then it will reflect poor management.
• If you want to close your loan early, then it can either benefit or harm your score depending on timing.

How Timely And Delayed Payments Affect Loan Offers?
 

What Happens When You Prepay Or Foreclose A Loan?

Niharika took a personal loan of ₹6 lakh at 13% for 5 years. After paying EMIs for 2 years, she received a work bonus. So, she foreclosed the loan by paying ₹3.2 lakh.

Doing this, she saved around ₹72,000 in interest. Also, after two months her score rose by 35 points. So, she was able to get a car loan at a lower rate.

Read More – The Impact of Late Payments on Your Credit Score

When Foreclosure Helps:

• You can save on interest.
• It will help you clear your debt faster and improve your financial health.

When It May Not Help:

• If you foreclose it too early, it can reduce your credit mix.
• It may shorten your credit history.
   

Tenure Selection – Does It Matter For Future Credit?

You might know that the tenure chosen by you influences your EMI size and total interest outgo. But you might not know that it also influences how lenders see your creditworthiness.

Let’s look at an example of credit impact on a loan of ₹5 lakh at an interest rate of 12%:
 

How Loan Closure Is Reported To Bureaus?

After you pay off or close your loan, your lender will update the credit bureau. You must know that this reporting is crucial. If it is not done properly then it can heavily influence your future loan chances.

Also Read - How to Create a Repayment Strategy That Works

You must ask your lender for a No Dues Certificate. You should also check your credit report to see if it shows the account as ‘closed’, not ‘settled.’
 

When Will Credit Score Improve After Loan Repayment?

Let’s look at the common timing of credit score improvement depending on what kind of action you take:
 

What Patterns Do Lenders Look For?

• Your constant repayment history shows that you did not miss any EMI.
• To see your responsible behaviour they look out for some ongoing credit.
• If you are foreclosing your loan after a year or two and not immediately.
• If you have no loan settlements or write-offs.
• If your credit report is showing your status as closed or paid in full.

Final Thoughts

If you think that you can repay your loan whenever you want, then you are wrong. Your timing of repaying your loan matters a lot. It will influence how your lender views your profile.

It shapes your credit score, affects the offers you get, and determines how quickly your applications will be approved. It is necessary for you to repay your loan on time.

You must properly plan when to repay, how to close the loan, and if it is reported correctly. It will help you to lower your EMIs, quicker loan approvals, and better financial opportunities.

FAQs

1. Is it necessary for me to check my report after every loan closure?

Yes, to make sure that your status is correctly updated.

2. Is it possible that missed EMIs will stay on my record permanently?

No, but they affect your score for up to two years.

3. Can a short loan tenure help me get a better future loan?

Yes, if you paid your EMIs without defaults.

4. How soon does a credit report update after loan closure?

Usually within 30 to 45 days.