Grace period is a feature provided by financial institutions, such as banks. This feature makes it easier for debtors who have difficulty paying on the due date.
For credit card users, the term grace period may be familiar. But for some lay people, this term can be something new and interesting to listen to.
What is a grace period?
Check out the full explanation below.
What Is Grace Period?
Experiencing payment problems can happen to anyone. For this reason, the grace period feature is here as a solution to your credit problems.
Quoted from the Big Indonesian Dictionary (KBBI), the grace period is the leeway (grace period) in paying off the principal and interest loans for a certain period of time so as not to burden the parties concerned.
In other words, the grace period is a feature offered by banks to facilitate debtors who have difficulty paying on the due date. Debtors referred to here are customers who have credit cards.
The grace period feature is given selectively by certain financial institutions. Not all financial institutions such as banks have this feature. This feature will only be active if you pay off your bill this month before the due date.
For example, if you pay off the transaction on the 10th, the transactions on the 11th-18th are included in the grace period. The grace period is generally 15 days. Even so, there are also financial institutions that apply a longer grace period of 21 days.
The Advantages of the Grace Period feature
Grace period is a feature provided by financial institutions to make it easier for their customers. What are the benefits offered by this grace period feature? Check out the following explanation.
Longer Payment Time
Grace period offers convenience in the form of leeway in paying bills. You can pay bills when the due date has passed. This is certainly very beneficial for debtors to avoid bad credit.
Later, every transaction that occurs during the grace period is calculated as the next month's bill. For the applicable period, generally, the grace period lasts between 15-21 days, depending on the policy of each bank.
No Interest
The grace period is a very advantageous feature. This is because, in addition to a longer bill payment time, transactions that occur during the grace period will not be subject to any interest.
This momentum is certainly very profitable for you and can be used to make transactions with a fairly large nominal.
Avoid Blacklist
In addition to providing flexibility in repayment times and being free from interest, you also benefit from the guarantee that you will not be blacklisted on your credit card report (blacklist) if you make payments past the due date.
Availability to Create New Loans
Even if this month's bill has not been paid, you can still make transactions during the grace period. This transaction will be accumulated as a bill in the following month.
Even though the grace period offers a number of conveniences and benefits, you still have to be wise in managing your finances. make sure to pay off the previous installments if you want to add another loan.
How to Use Grace Period
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Grace period is a feature provided by banks or insurance companies so that customers can delay payment for a certain period of time after the due date (after the payment deadline).
Before you take advantage of the grace period feature, there are important things you need to pay attention to. Including the following.
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Monthly Transaction Closing Date
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Credit Card Bill Payment Due Date
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The last remaining balance of your credit card
By knowing these three things, you will know when the grace period applies and how much total costs you need to pay during that period.
In addition to paying attention to these points, you should also pay attention to the terms and conditions set by the bank in the agreement letter. This is because each bank has different policies.
In addition, make sure you don't miss any monthly installment payments where this payment is made closer to the payment term in the following month. If you don't, you can't use the grace period feature, as a result, you need to bear the fines and interest from the previous bill
If all the conditions are met then you can take advantage of this feature. Some examples of transactions that you can use include:
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Used for Purchase Transactions in Large Quantities
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Mortgage Installments
Mortgage or Home Loan installments can be paid through the grace period. Generally, the grace period for home loans ranges from 3 to 6 months.
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Insurance Payment
Grace period is not only offered by financial institutions such as banks. Many insurance companies out there also offer similar features.
For example, the grace period for life insurance generally ranges from 14 to 30 days. It depends on the policy of the insurance company.
As for vehicle insurance, the grace period given can reach 60 days.
Example of using the Grace Period feature
Grace period is a feature on credit cards to ease the payment burden. To make it easier for you to understand what a grace period is, let's look at the following example.
Mr. Andre is a customer of bank A and has a credit card. He has a credit card bill every month on the 25th. In the agreement letter, it is written that the due date is on the 6th of the following month.
Bank A provides a grace period feature. If Mr. Andre wants to take advantage of this feature, he must make full payment on the 25th before the due date. Only then can Mr. Andre make transactions without worrying about interest from the 25th to the 6th of the following month.
On the other hand, if Mr. Andre is unable to pay off the bill by the date, then Mr. Andre cannot enjoy the grace period feature offered by bank A. and remains obligated to pay off this month's bill along with the interest. With this, we can conclude that the new grace period can be used if we have paid off the previous bill.
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Tips for Paying Off Loans on Time
Loans, whatever their form can be a pretty heavy burden if we do not manage them carefully.
The following are tips that you can try to pay off the loan on time.
1. Strong Intention and Determination
Success is determined by many factors, one of the most important is the existence of a strong intention and determination. You must have these two things if you want to pay off existing loans.
2. Existing Loan Recapitulation
Re-record any loans you have completed with the applicable due date. This makes it easier for you to find out how much money you need to pay to pay off the loan.
3. Determine Priority Scale
After you have successfully recapitulated all the loans you have, the next step is to determine the priority scale, choosing which loans must be completed immediately (prioritized).
4. Selling Unused Items
Ever heard of the Konmari method? You can apply this method and sell unused items. The collected funds can later be used to help pay off your loan.
5. Looking for Extra Income
Selling unused items has not covered the funds needed to pay off the loan? Looking for additional income could be the solution! For example, you can offer freelance services in your spare time.
6. Avoid Digging the Hole Close the Hole
Although it is an instant method, borrowing money to cover a previous loan (digging a hole and closing a hole) is not a wise way to do it. Instead of paying off the debt, it just adds a new burden.
Sobat BFI, that's an explanation of the grace period. The grace period is a feature that makes it easier for debtors to review loans with a longer repayment period.
Although it offers many conveniences, using this feature must be wise in order to avoid inflated bills or blacklists.
Hopefully, this article can help readers to understand the grace period. Find out more interesting information at BFI Blog!