With various lenders available today in the market, borrowing funds has become a lucrative and viable option. A personal loan, when managed responsibly is a prudent choice for availing additional funds to meet your financial exigencies. It can be for different personal reasons like funding a wedding, remodelling, or renovating your home, moving from one location to another, debt consolidation or paying hospital bills. However, while procuring a personal loan is a fairly simple process, managing its monthly repayments is a task you must plan out before availing the loan. Doing so allows you to reduce your financial burden.
Discussed here are 5 smart ways to plan out your personal loan EMI –
- Manage your expenditures
No matter what stage of life you are in, you must prepare a budget and manage your expenses. Reduce your discretionary expenditures like online subscriptions, fuel costs, phone bills, etc. Even a little saving can assist you to pay your EMI with zero hassles.
- Invest to save more
A wise planner is not the one who allows their money to sit idle. If you hold considerable savings in your bank account, ensure to invest them properly to earn returns and interest on it. You can opt for mutual funds or fixed deposits to allow your funds to grow. Excess money or the interest earned on your investments can be used for repaying your personal loan during financial emergencies, when you may fall short of funds.
- Plan out your repayments in advance
While there are many lenders offering low personal loan interest rates, a low rate may not suffice to ensure timely EMI repayments. As a borrower, you must plan out your EMI structure well to make sure you have adequate funds and avoid any defaults in repayment of the loan instalments. For computing your personal loan EMI, you can take the help of an online personal loan EMI calculator to plan out your repayment as per your budget and repayment potential.
- Increase your repayments with an increase in your income
If you are a borrower, you must aim at repaying your personal loan as fast as possible. If, along with your monthly salary, you draw commissions and bonuses, you can use this additional influx to part prepay your personal loan before schedule. However, it is crucial to note that prepayment penalties may be applicable in the case of fixed interest rate personal loan.
- Refinance or consolidate
If you are struggling to make your personal loan EMI repayment on time, then you may consider asking your lender to restructure your loan. Few lenders may agree to readjust your personal loan interest rates, repayment tenures or EMIs according to your repayment potential. Additionally, you can consider consolidating your multiple smaller loans into a single loan to save on your interest cost.
In case your existing personal loan rate is high, you can consider refinancing your loan too. You can transfer your existing personal loan to a new lender offering lower interest rates to not just save on your interest cost but also set your personal loan EMI as per your budget or preference.
As a personal loan borrower, failing to repay even a single EMI can result in a substantial financial setback. Not just it enhances your debt burden for the next month but even reduces your credit score. Thus, before you hit on the personal loan apply button, ensure to plan out your repayments as per your potential to avoid any defaults in the future. Also, you must ensure to check up online personal loan eligibility calculator to compare among different lenders to zero in on the one as per your budget, credit profile and eligibility and not go for any lender whom you approach first.