It might seem like an additional step or even a marketing strategy, but there’s a practical reason behind it.
When you take out a loan, you commit to repaying it over time. To streamline this process, banks often require borrowers to open an account with them for the loan-related transactions, particularly for EMI payments.
The necessity arises from the need for a standardized payment method. Banks use the National Automated Clearing House (NACH) system for automated payments. If your account is not with the lending bank.
One crucial reason for this insistence is to avoid signature discrepancies. EMI rejections due to signature mismatches can lead to various issues, such as late payments affecting your Credit Information Bureau India Limited (CIBIL) score. This, in turn, can complicate future loan applications.
By opening an account with the lending bank and providing Standing Instructions, you eliminate the risk of signature-related problems. This ensures timely and seamless EMI payments, preserving your CIBIL score and preventing any hindrance to your financial reputation.
Moreover, some banks offer additional benefits when you have both an account and a loan with them. These perks may include waived minimum balance requirements or exclusive offers and deals. The synergy between your account and loan in the same bank can open doors to various advantages, making it a practical choice beyond the loan repayment convenience.
So, the next time a bank recommends opening an account along with your loan application, consider the broader benefits that come with this financial alignment.