A personal loan is a blessing when there is an urgent money crunch. As this is an unsecured type of loan, it is easy to apply and simple to avail. However, some people don’t apply for it, fearing the higher loan interest rates and the personal loan EMIs they need to pay per month. Hence, not managing the monthly outlays may derail personal loan EMI, and thus, people avoid it. Personal loans are a much-favoured option as they require minimum documentation as compared to other types of loans. However, these tips for managing a personal loan can make it effortless to control or reduce your loan EMI so that it does not hamper your other monthly expenses.
Check Your Repayment Capability: The first step towards efficient EMI repayment is to ascertain your loan repayment capability. Ensure you are well aware of the loan provider’s loan interest rate and loan repayment flexibility. This knowledge can help determine the EMI amount for the total loan tenure and better plan your budget. Moreover, these days, a lot of loan providers offer online personal loan EMI calculators. The personal loan EMI calculation depends on three factors – the personal loan interest rate, the personal loan amount, and the personal loan tenure. This can help in making better financial decisions for the loan repayment.
Put Out Reminders for EMI Payment: To make sure that you do not miss any of your EMI payments, it is essential that you set-up monthly reminders to inform you whenever the EMI payment date is due. With these reminders’ help, you can ensure that you have a sufficient balance in your bank account for the EMI amount to be debited. You tend to pay back the loan faster if you are regular with EMI payments. In case you fail to maintain the frequency of payments, the EMIs tend to pile, which might lower your credit score.
Budget Your Expenses: Always keep in mind that the EMI amount should not exceed more than half of your monthly salary. This will guarantee that you can effortlessly manage your supplementary every-day expenses without any hassle. It is advisable to trim any unreasonable, unnecessary, and extravagant costs while you can repay a loan.
Maintain a Good CIBIL Score: A CIBIL score helps determine a borrower’s creditworthiness. It is a three-digit score that is a reflection of your past credit history. Generally, a score of 700 and above is considered an excellent CIBIL score. Borrowers with such CIBIL scores can be more readily granted a personal loan. Moreover, with a good CIBIL score, a borrower can also avail of personal loans at low-interest rates. A good CIBIL score also assures the borrower of your integrity.
Opt For Longer Loan Tenure: The loan tenure is inversely related to the EMI amount. Higher the loan tenure, the lesser the EMI amount and vice versa. Thus, if you do not want your EMIs to become a financial burden for you in the future, you can opt for a longer loan tenure at the time of availing of your loan. Doing this could significantly reduce your EMI amount, making it better to manage your monthly budget.
Please Read Terms & Conditions Carefully: It is always recommended to do a detailed analysis of the interest rate, monthly EMI, and carefully read the terms before availing of any personal loan. You must only help the loan if you are entirely convinced and confident that you can pay back the loan through EMIs promptly
If you are mindful of these things, you can never go wrong with a loan. Hence, it is best that, as a borrower, you carefully consider the tips mentioned above to manage your loan EMIs better. Paying your personal loan EMIs is extremely important. Any default on your EMI payments could significantly impact the borrower’s credit score negatively. This, in turn, could damage the borrower’s chances of availing any future loans. Moreover, the borrower might also be legally bound to pay some late fees or penalties as per the personal loan provider’s agreement policy.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at email@example.com.