6 Smart Strategies to Manage Your Personal Loan EMIs and Monthly Budget
Read on to know the various strategies that you can adopt to manage your personal loan EMIs and monthly budget
Personal loans are versatile financial tools, providing swift access to funds to help you through a financial crunch. Whether it's covering unexpected expenses or achieving a short-term goal, these loans help you handle such undertakings with ease.
However, availing a loan comes with certain obligations, one being that you have to repay your dues on time. To efficiently handle this financial commitment and stick to a budget, there are a few strategies that you can try. Here, the personal loan EMI calculator can be an invaluable tool as it is both freely accessible and reliable.
Read on to know the various strategies that you can adopt to manage your personal loan EMIs and monthly budget.
Get a Loan Amount that Fits Your Budget
The EMI amount that you need to pay towards your personal loan is directly linked to the amount that you borrow. Therefore, getting a loan amount that fits your budget is critical to securing an instalment amount that aligns with your financial capabilities.
You should prioritise taking a loan to cover only essential expenses. This is because a higher loan amount results in higher interest costs, and even a larger EMI obligation. Even if you have a strong credit profile with a high credit score, it is essential that you only borrow as needed.
Opting for a high loan amount just because you qualify for it isn’t smart or financially responsible. To know what you can afford to repay, use the personal loan EMI calculator and adjust the sanction value for set interest rate and tenure values.
Remember that late payment or non-repayment of your loan can result in penalties and other severe consequences.
Ensure Regular and Timely Payments
Late payment of your personal loan can significantly impact the cost of your loan. This is primarily due to the penalties and charges associated with late payments. Moreover, not paying the EMIs on time will only make the next EMI harder to repay.
It also takes a toll on your creditworthiness since every late payment reflects on your credit report. Defaults will cause a significant dip in your score, which can take months to rebuild. To prevent these consequences, prioritise making your monthly instalments on time. Being diligent with repayment is crucial to building a strong credit profile.
Here, a simple tip can be to set aside your EMI amount in another account, immediately after you get your salary or income credited. This way, even if your EMI payment date is later in the month, you don’t have to worry about paying it.
Aim to Pay More than the EMI Amount
Paying more than your EMI amount when you have additional funds is a great way to lower your outgo. By channelling more funds towards your personal loan every month, you lower the principal loan amount.
This means that you need to pay lower interest since the outstanding amount is reduced. Along with reducing your EMI burden, this can also expedite loan repayment. So, check if you can free up additional funds and allocate them towards your loan.
However, note that some financial institutions charge prepayment or foreclosure charges if you choose to settle your loan earlier. Before deciding to make additional payments towards your loan, check with your lender to ensure that these payments do not negate any savings you would make.
Select a Suitable Loan Tenure
Choosing a suitable loan tenure is essential to finding an EMI that you can handle comfortably. The repayment period and the EMI amount have an inverse relationship. This means that when you opt for a longer personal loan tenure, your instalments are smaller.
This is because the outstanding amount gets repaid over a longer timeline. However, it is essential to know that a longer repayment tenure leads to higher interest outgo. This is because you need to pay interest on the remaining loan amount for a longer period.
Alternatively, a shorter tenure reduces your interest outgo but increases your EMI amount significantly. This is why you must assess your personal finances and income flow and establish an optimal EMI plan.
Choose a shorter loan tenure if you want to save money by paying less in interest. On the other hand, if paying a larger EMI is difficult for you, choosing a longer repayment tenure is ideal.
You can use a personal loan EMI calculator to know the monthly instalment amount associated with different loan tenures. This way, you can choose a tenure that allows for affordable payments.
Negotiate with the Lender for Better Rates
If you have a strong credit profile and a favourable credit score, you can negotiate with your lender and ask for better loan terms. This way, you can get lower interest rates and a repayment tenure that suits you best.
However, this may not be possible if you have a term loan with fixed interest rates. Lenders value borrowers who have high creditworthiness, which displays a strong commitment toward repaying their loans.
Therefore, if you have a solid repayment history and a good credit score, your lender might lower your interest rate and waive any specific fees associated with your loan. The best way to move ahead is to compare the existing interest rate of your personal loan with the current market rates that various lenders offer.
Then, present your requirements and highlight your financial stability and repayment record. Exploring this strategy can significantly reduce your EMI burden and make them more manageable.
Try to Reduce Your Monthly Expenses
You can also better manage your personal loan repayment by reducing your monthly expenditure. Reducing your expenses makes your monthly repayment easier and allows you to take out funds for additional payments.
This helps you decrease the loan amount and interest costs, along with expediting your loan repayment. You can do so by assessing your income and expenses and lowering your spending on luxuries.
Along with that, you can also identify cost-saving alternatives for your essential expenses. Review your subscription services bills and proactively lower your expenses until you repay your personal loan.
By implementing these strategies, managing your personal loan EMIs is sure to become a lot simpler. Before making any decisions, compare loan options and carefully review the fine print. Being an informed borrower is the first step to being a smart borrower, equipped to manage loan repayment efficiently.
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