If you’re among the 75% of Canadians who live in debt, you likely are wondering whether autopay for loans is a good choice. This is a highly personal question because automatic withdrawal has both benefits and downsides.
Here, we’re going to talk about the pros and cons so you can figure out the right choice for your specific needs and lifestyle. Read on to ensure that you can make timely payments and get out of the hole ASAP.
The Basics of Automatic Withdrawal
If you’ve taken out a loan to cover urgent costs or get back on your feet, you’ll need to pay it back in the easiest way possible. After all, it’s super important to avoid late fees and penalties! This means making timely payments, getting the money back as quickly as possible, and keeping track of your monthly loan payments.
Autopay options make it easier than ever before to pay back your loan.
You set the date that you want to make a recurring payment to the lender each month. Once you decide when to pay, you schedule it in your bank account. The appropriate amount of money will leave your account on the set date and make its way to the company you lent from.
Advantages
As you would expect, there are a lot of benefits to this. Since you’ll pay back your personal loans in even amounts every month, you’ll always know exactly how much is coming out of your account and when. This makes it easier to budget and plan out your monthly spending.
Avoiding Late Payments
When you need to pay a loan back monthly, it’s important that you don’t miss any payments. If you’re late with even a single payment, you’re going to be hit with penalties from the lender. Your credit score will also take a hit, which will make it harder for you to get future loans.
When you use automatic withdrawal, you won’t even need to think about paying back the loan. It’s just something that will happen at the set time. This means your payments will always be on a consistent schedule so you don’t need to contend with late fees.
An Easier Chore
Manually paying back your loan every month is annoying. You’ll need to log into the lender’s website, enter your personal and banking information, and review everything. By the time you hit send, you’ll have wasted several minutes of your life that you’ll never get back.
It’s also super stressful to constantly remind yourself of having to do a tedious monthly task. With automatic loan payments, you won’t need to worry about performing the chore (and remembering to do it).
Simple Automation
It’s also really easy to automate payments from your checking account. You’ll only need to log in once and set up the recurring transfer.
The whole process should only take 5-10 minutes. That’s way less time than it would take to log in and deal with the task every month! Plus, since websites are increasingly mobile-friendly, you can even set up these payments while on the go.
Multiple Options
Most people use a debit account to automate payments. This is ideal because the money goes directly from your account to the lender. But others choose to put recurring payments on their credit cards and pay them off on the card carrier’s website.
This is ideal for people who want to get rewards from their credit card carriers. It could be a fast way to get cash back or a fun gift card. It also ensures that you won’t be hit with overdraft fees from your bank if you don’t have sufficient funds to make the payment.
Downsides
As you probably expect, insufficient funds are the #1 con of autopay for loans. If you connect to a checking account and don’t have enough money in it when the automatic payment goes through, it’s going to bounce. You’ll be hit with both loan penalties and bank overdraft fees.
Luckily, this problem is generally an easy fix if you keep a small cushion in your checking account. If you can’t do this, you can set up autopay on any credit card. Assuming that you don’t hit your credit limit, you’ll just be able to pay it off at the end of the month.
Missing Mistakes
If you don’t constantly check the lender’s website or your bank account, you could fail to catch any mistakes with your payments. You might accidentally overpay or underpay one month if you’re not vigilant. You also might fail to catch fraud, which would be really bad.
Luckily, you can nip this problem in the bud by setting up email or SMS alerts about payments. You’ll be able to immediately see any suspicious activity or incorrect payments. This will give you the intel you need to resolve the problem ASAP.
Cancellation Challenges
Most people find automatic withdrawal a convenient and reliable way to make their monthly loan payments. But if you decide you want to cancel them, you might be looking at a difficult and annoying process.
Long hold times on the phone or wait times for email replies are grating at best and generally pretty stressful. Some people find it best to avoid autopay to avoid this possibility.
Pay Your Monthly Loan Payments the Right Way
Making your monthly loan payments is important, and whether you use autopay should be a matter of what makes things easier for you. Now that you know the pros and cons of automatic withdrawal for loan payments, it’s time to get started with King Cash.
Our leading Canadian money lenders are excited to help you access quick and easy loans for fast spending. Contact us to learn more about how we can help get you back on your feet in a pinch.
