Have you been in a situation where your total loan balance increased? Do you want to know what increases your total loan balance? This page will explain everything you need to know about what increases your total loan balance. Keep reading to discover that.
Be it government loan, student loan, private loan, e.t.c. There are certain amounts, including the interest you must pay. Now, in a situation when your loan balance increases, you need to find out and fix that as soon as possible.
What increases your total loan balance
The key factors that increase your total loan balance are:
- Loan extension
- Loan top-up
- Delay in payment
- Outstanding principal
- New principal
- Error from app/website
A situation whereby you extend your loan before its due date is called a loan extension. Whenever you extend your loan payment duration, a fee is being charged and that is an increment to your total balance.
The loan extension can be a few days, a week, or a month. The longer the extension period, the higher the amount being charged.
Loan top-up is another key factor in what increases your total loan balance. At some loan companies, despite having an existing loan, you can still be allowed to top up to your current loan balance. When you top up your loan, it will increase your total loan balance.
Delay in payment
There’s a penalty whenever you delay making your payment. Failure to make payment will attract the current charging rate of interest on outstanding debt. The interest can be from 1.5% to 15% depending on the company.
However, if you fail to make payment, it will increase your total loan balance. This will continue until you clear your payment. The government of a country can decide to pardon and forgive for the loan, if the loan is from the government.
An outstanding principal is the amount you still have to pay on your current loan after your fees are deducted. For example, your existing loan balance will be an increment to your total loan balance. If your total loan balance is $5,000 and your top-up is $3,000, your final total balance will be $8,000.
This is another factor on what increases the total loan balance. The new principal is simply the top-up you made in your loan account. Every new principal will surely be added to your existing loan amount. This will affect your total loan balance, thereby increasing it.
Error from app/website
If you have not figured out what increases your total loan balance, then it could be an error. The error could come from either the app or the website. This is unlikely to happen, but if it occurs, you need to do is to contact the customer care.
How to avoid an increase to your total loan balance.
- Do not top up your loan. Make sure that you clear your existing loan balance within the time frame given to you.
Do not apply for an extension. Extension charges extra interest, which will be another burden to you. Clear your loan as soon as possible.
Delay in payment is dangerous. When people ask what increases total loan balance, this is the number one key factor. Avoid delay in payment.
Frequently asked questions
Does interest accrual increase loan balance?
The answer is yet. An interesting of 1.5% to 15% or more will increase your loan balance. This is done when you’re unable to settle your loan, or extend your loan payment period.
Is it okay to use another loan to pay a loan?
It is never okay to make use of another loan to pay a different loan. This is because you will continue losing. If you have an existing loan of $1000, you need $1000 to clear your loan. In a situation whereby by you decide to borrow a different loan of $1,000, and interest of 10%.
This will make it a new principal of $1,100. When you pay back your initial loan of $1,000, you will still have to pay back $1,000 plus a 10%interest of $100, which is not advisable.
What is the best type of loan to get?
The best loan to get is the student loan from the government. The payment duration is longer, and sometimes it can be pardoned. That means you won’t pay back the amount. The most interesting fact there is that you won’t be disturbed, unlike other non-governmental loan companies.
After going through this content, I’m sure you’re able to understand what increases your total loan balance. If you find this content helpful, kindly share with your friends.