Money management can be challenging, especially when you have to repay multiple loans. As interest on debts accumulates, it’s crucial to pay them off promptly. However, keeping track of all the repayment schedules and balancing different interest rates can be a struggle. That’s why it’s important to use tools and facilities available to simplify finances. One such banking service is the ActivMoney Savings Account.
ActivMoney is an auto sweep facility in savings accounts that helps customers earn higher interest on their idle funds while maintaining all-time liquidity. It works by automatically transferring any excess funds beyond a specified threshold from the savings account into a Fixed Deposit (FD), thus thereby earning higher FD-like interests. Thus, your idle money is utilised efficiently and generates additional income actively through interest earnings.
The auto sweep functionality within the ActivMoney Savings Account can be helpful for borrowers looking to accelerate their loan repayment. Here’s how:
- Interest offset
Loans, especially high-interest ones, can substantially burden your finances. By utilising the facility of ActivMoney or auto sweep in savings accounts, you can potentially offset the interest you pay on loans. As the swept amount gets transferred to an FD, it starts accruing interest at FD rates, which are generally higher than regular savings account rates. This accrued interest can then be used to offset the interest payable on loans, thereby reducing the overall interest burden.
- Optimum utilisation of idle funds
Imagine having an outstanding loan and a substantial sum of money in your savings account. Instead of allowing the interest on your loan to accrue or earn a nominal savings account interest rate, you can leverage the ActivMoney facility to optimally utilise your savings. By channelling these funds towards your loan repayment, you can effectively reduce the principal amount.
- Emergency loan coverage
While the primary focus of auto sweepmight be optimising savings, its liquidity feature can act as a safety net. In cases where the account does not have enough funds to fulfil a loan repayment, the FD will be prematurely broken, and the required amount will be transferred to your account. This premature breaking of FD does not incur any penalty charges.
This flexibility reduces the risks linked with locking up your funds and gives full-time access to your savings even during critical times. This helps you strike a balance between paying off debts and addressing urgent financial requirements without facing unnecessary financial setbacks.
- Building a contingency fund
It is important to create an emergency fund before addressing loan repayment. This fund acts as a safety net, helping you easily cover unexpected expenses that may arise in daily life. An ActivMoney Savings Account helps you channel idle funds into a higher-interest FD while ensuring it remains accessible during emergencies or when funds are insufficient. This gives you complete liquidity and flexibility to manage your finances effectively.
It is still advisable to open a savings account online exclusively for emergency funds so that your FD can earn interest without disruptions.
ActivMoney’s auto sweep: A Tactical approach to accelerate loan repayment
The Auto Sweep feature can help you optimise your savings, generate higher returns, and accelerate your debt repayment journey, all at the same time. As long as you strategically park idle funds through the auto sweep and utilise them to reduce loan expenses, it can be an effective tool for managing finances.
You can either open an online savings account that offers ActivMoney or simply activate it online if your current bank offers this feature on your existing account. Simply reach out to your bank to explore this invaluable facility and enjoy FD-like rates to supercharge your savings.
