If I use my credit card to make a purchase and opt for credit card EMI for 9 months, can I prepay after a few months?
Unfortunately no unless you are ready to pay a penalty. If at any point you have enough surplus cash and feel like closing out your credit card EMI loan, you will be charges a 2.5 to 3% pre
closure penalty fee depending on your card. This means you are bound till the Emi tenure ends or pay a penalty fee to balance out your dues.
Will a default in credit card EMI harm cibil?
Technically one default may not have such a deep impact on your credit score but one default can easily lead to more defaults which can have a serious impact. The EMI is reflected in your credit card bills along with other dues. Now if you miss any EMI payment deadline, you will be charged a regular interest rate of 35-40% as per your card instead of the 12-15% you were being charged under the credit card EMI scheme.
Any default on your Credit Card bills will affect your Credit Score. Here are some of the major factors that could affect your Credit Score.
• Repayment history – If you are an individual who has a history of making timely repayments this would result in a high Credit Score for you. Clearing all your bills and loan repayments before the due dates would have a positive impact on your Credit Score. Any missed payments or overdue payments would lower your score as they indicate that you have trouble servicing your obligations.
• Utilization of credit limits – Credit Cards today offer high credit limits and if you are a person who uses this limit to the maximum it could have a negative impact on your Credit Score. A higher utilization of available credit limit indicates an increased repayment burden. Sticking to the lower side of the limit in this case could raise your score.
• Debt servicing time – The amount of time you have been using credit for is an important factor when it comes to calculating your Credit Score. If you are an individual who has been servicing debt for a long period of time and have been making timely payments, then this would have improved your score.
• Higher percentage of Credit Cards or Personal Loans – An individual with more secured loans (home loan/auto loan) is more likely to have a positive score compared to an individual with more unsecured loans. An unsecured loan is the most expensive form of credit and higher the number of unsecured loans, more would be the payments that you will need to make to settle them. An individual with more unsecured loans is more likely to have a lower score. A good mix of both will ensure that your score remains high.
• Credit applications – Individuals today apply for multiple loans and Credits Cards thinking that more credit will translate into a better lifestyle. This hunger for more credit could impact the Credit Score of an individual negatively. Credit institutions exercise caution in case of individuals who constantly apply for more credit or who have just been sanctioned a new loan. This is why applying for too many loans and Credit Cards at the same time can have a negative impact on your Credit Score.
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