A personal loan is an amount that you borrow from the bank whenever you need financial support, and the amount has to be repaid in the form of an EMI. A personal loan is also called an instant loan as it is available to you within significantly less time compared to other loans, and it can be used for multiple purposes in times of emergency. Availing of a personal loan requires minimal documents, and even the criteria are easy to fulfill.
It can be said that applying for a personal loan is more accessible and cheaper when compared to other loans. But that is not enough. You even need to repay it. Repayment of the loan requires financial discipline and a lot of responsibility, as it goes without saying that each EMI should be paid on time. Any single default in repayment of your instant personal loan may affect your credit score and your future borrowing capacity. So here in this article few tips will be explained to help you manage your personal loan EMI repayment in a better way.
Tip#1: Take the help of a personal loan EMI calculator to estimate your repayment capacity:
When you apply for a loan, the amount to be borrowed depends on the expenses or your needs, and the interest rate of the loan is decided by the lender. So what you are left with to manage your repayment capacity is the tenure of the loan. It is where you can play smartly. If you have a low income and higher expenses to meet, then it is advisable to opt for a longer tenure of the loan. However, it is usually advisable to repay the loan as early as possible if you have the amount to repay, as this will save you from paying the extra interest on the borrowed amount. The EMI calculator will help you in your tenure planning in a way that will not pinch your pocket, your monthly budget is manageable, and also the repayment is done on time without affecting your credit score.
Tip#2: Plan your monthly budget:
It is mandatory on your part that, when you apply for an instant personal loan, you begin to practice financial discipline in your life and make specific changes in your lifestyle in a way that your monthly budget supports you in paying your EMIs of loan. In case you are married, it is advisable to sit with your spouse and make a listing of all your monthly income and expenses. Then look for the expenses that you can cut down on and find out for any new source of income, like freelancing, if there is a need. Basically, all your planning should be done in such a way that every month, you have a surplus amount to pay your EMI without any difficulty.
Tip#3: Set reminders for your EMI payments:
It is very much possible that you may forget the due date of the payment in some months due to your busy routine. So to overcome this problem, it is advisable that you set regular reminders prior and always attempt to pay the EMI 2-3 days before the due date. It will save you from any technical glitches or any of your personal emergencies that you may have on the due date. A more helpful option is that you set regular EMI payments of online personal loans from your bank account. It will result in an auto deduction of the amount from your account towards your EMI payment on the selected date without your involvement.
Tip#4: You may restructure or consolidate your loans:
Preferably, you should plan and opt for the right amount and tenure of the loan while you apply for the personal loan. However, even after planning your best you find it difficult to pay the EMIs, you can always talk to your lender and take their help in managing the term of the loan by increasing your loan tenure. You also have an alternative of consolidating your loans into a single loan. It will be helpful in a way that you just have to remember a single due date and also save you from high-cost loans.
Tip#5: Search for ways to pay your loan earlier:
It is always thought that you need to continue your loan till its tenure. It is not so. If you have extra money from a salary hike or you receive a gift or anything else, then you should look for opportunities where you can prepay your personal loans online, or it is better to close the loan before the tenure. However, you should first check out the penalties that are applicable and also do the cost-benefit analysis of the penalty and the interest rate that you pay through the entire loan tenure. Other than this, you can also consult your lender and ask to increase your monthly EMI amount. This way, you can repay your loan early and will also be saved from paying extra interest rates.
Tip#6: Your EMI should not be more than 50% of your monthly income:
It is very much vital that you plan your personal loan in such a way that your monthly EMI does not cross 50% of your monthly income. It is the boundary that you should draw, and you should never let this limit be crossed. It makes sure that you have enough money for your monthly expenses. It is essential to plan it this way. Else you will end up in more debt. For example, you will borrow money from A to pay B, which is never a desirable situation in any way.
Thus, planning your repayment of the instant loan is beneficial in many ways. Foremost you can take it as an opportunity to self-discipline yourself to manage your finance right. It will also save you from getting into the debt trap. We hope this article serves a fruitful objective in your pursuit of financial knowledge.