Technology has made things easier for most of us. From purchasing gadgets and groceries to making travel and hotel bookings, everything can now be done in a few clicks or taps. Mobile wallets such as PayTm, Amazon Pay and PhonePe have add to convenience in a big way. You can now easily make your mobile, electricity, gas and insurance payments in a few clicks. A recently added service on the mobile wallets is loan payments.
If you have to make a loan EMI payment, you have a few options available. You will either go to the lender’s website and make payments through net banking or UPI. You can drop a cheque. You can also provide an ECS mandate so that your bank account gets debited automatically.
Now, you can use your PayTm wallet to make EMI payments for loans with some of the lenders. I browsed through the list. Most of the lenders were NBFCs and housing finance companies (HFCs). Most prominent NBFCs and HFCs such as HDFC, Bajaj Finserv, DHFL Limited and Muthoot Finance were present in the list. RBL Bank was the only bank in the list. As I understand, other prominent wallets such as Amazon Pay and PhonePe do not offer this facility for now. However, you can expect other wallets to add this feature to get added in the near future.
How Do You Make the Loan Payment Using PayTm Wallet?
You need to select the lender and enter your loan account number. Subsequently, PayTm automatically fetches your amount due (along with the name in the loan account). You can verify the details to ensure that the payment is made to the right loan account. You can subsequently make the payment. As I understand, PayTm has tied up with the listed lenders and therefore can fetch your amounts due from the lender with your loan account number. You can make the payment for loan EMI using your wallet or you can do it using your debit card, net banking or UPI.
Using Credit Cards to Pay Loan EMI
You cannot use your credit card to pay for your loan EMI. If you were thinking that you could earn reward points on your credit card for your loan EMI payments, you are mistaken. Even if this were allowed, using credit card for loan payments is not a good practice. This can easily lead you into a debt trap.
There is a minor concern when you make loan repayment using wallet balance. When you make payment through net banking, debit card or UPI, your bank account gets debited towards the payment. However, it is different if you make a payment through your balance in the wallet. You could have loaded your wallet using a credit card. In such a case, you are essentially using your credit card to make a loan repayment (something that we saw was not permitted outright). To put it in a different way, a new loan to repay an existing loan. When your credit card bill becomes due in say 45 days, you can then take out a second personal loan to pay the credit card bill. You can then use credit card to load your wallet to pay loan instalment of the second loan. And so on. The situation is not that bad though. There are checks in the system that do not let you keep rolling on existing debt through additional debt.
The good part is that you can load only up to Rs 10,000 per month in your wallet (if your KYC is not complete) and up to Rs 1 lac per month (if your KYC is complete). Therefore, this smart arrangement cannot go on forever. Moreover, it is not easy to take out loan after loan. The banks look at your existing loans, credit cards, credit score and your creditworthiness before they offer you a loan. As I see, the payment from wallet can provide very short term relief (a few weeks at the most) from cashflow mismatch.
Conclusion
Mobile wallets are a lot about convenience. I use wallets for my utility payments, insurance payments, travel booking and for regular online purchases. The entire experience is quick and quite smooth. If I had a loan, I could have even made loan EMI payments using wallets. Have you been using your mobile wallet to make loan EMI payments? Let us know about experience.