4 Powerful Tips to Help You Better Manage Your Personal Loan EMI Payments

Financial emergencies appear without warning. It could be for a medical emergency, a wedding, a new gadget, or for a vacation. It is not always possible to come up with collateral to avail of a loan against it. Or, there isn’t enough time to go through a lengthy loan process to get the desired funds. It is when an instant personal loan can come to the rescue. A Personal Loan is an unsecured loan that doesn’t require you to pledge an asset as security. Also, there is no end-use restriction in a personal loan; you may use it for a variety of purposes. Personal loans are offered by most banks and NBFCs. You can easily apply for an online personal loan on the lender’s website or mobile application. However, before applying for a personal loan, you should bear in mind that personal loan interest rates are significantly higher than secured loans. The inability to repay personal loan EMIs on time can severely impact your credit score and CIBIL report.

Things to Know Before Applying for a Personal Loan

A Personal Loan is a versatile loan that can help you fulfill a variety of financial needs. However, repayment of this high-interest loan requires good planning and self-discipline.

Before you decide to apply for a personal loan, do keep the following points in mind:

• Purpose of the Loan: Personal loans charge some of the highest interest rates in the industry. Ask yourself why you want to get a personal loan. Is it for something that can be avoided or postponed?

• Eligibility Criteria: Most lenders are wary of lending to customers with a credit score of less than 750. A low credit score denotes below-average credit management and thus low creditworthiness. This, in turn, means a higher associated risk for the lender.

• Interest Rate Comparison: It is important to compare the personal loan interest rates offered by different lenders. You can easily check this online to ensure you get the lowest rate.

• Repayment Evaluation: It is crucial to evaluate your financial condition, including other financial obligations, thoroughly. You must ensure that your income is enough to cover the personal loan EMIs. An online Personal Loan EMI Calculator can help you get an estimate of the monthly installments you need to pay for a particular loan amount, tenure, and interest rate.

• Read the Fine Print: You should always go through the personal loan application form thoroughly. You should be aware of additional charges or costs that may be involved in availing of the loan.

Suggested Read: How Long Does A Personal Loan Take To Process

Tips to Help You Better Manage Your Personal Loan EMI Payments

Digitalization has enabled borrowers to get loans instantly to take care of their financial needs. However, on the flip side, these instant loans may entice you to borrow money for frivolous purchases or borrow more than required. When managed smartly and responsibly, personal loans are a great way to tide over a short-term financial crunch.

Here are some effective tips to help you better manage your Personal Loan EMI payments:

• Prepare a monthly budget: An instant personal loan is a quick and convenient funding option but you should ensure its timely repayment. Defaulting on loan repayments can harm your credit score. Budgeting is the simplest way to ensure that you have sufficient funds to cover personal loan EMIs. First, you should note down the fixed monthly expenses such as EMIs, school fees, utility bills, grocery, rent, etc. Find out which expenses can be cut down. Creating a contingency fund can help you tackle sudden expenses without borrowing more money.

• Choose your loan tenure wisely: Most lenders provide personal loans with tenures of up to 60 to 72 months. If you opt for a higher tenure, your EMIs will decrease and vice-versa. However, the problem with a higher tenure is that you would have to pay greater interest on your personal loan. The impact of loan tenure on the personal loan EMI is often overlooked by borrowers. Loan tenure should be chosen after careful consideration of your financial capacity and preference.

• Set EMI payment reminders: Missing personal loan EMIs not only affects your credit score but also attracts hefty late payments and finance charges. You could set up EMI payment reminders on your phone. Better still, set up automatic EMI payments from your savings bank account. All you need to do for it is sign an auto-debit mandate form with your lender while borrowing the personal loan.

• Loan Pre-payment: Whenever you have a surplus or idle cash, consider making additional payments toward your Personal Loan. This can help reduce the principal amount payable as well as reduce the tenure of the loan. Even a part prepayment can bring down the EMI of the personal loan considerably. Also, if you decide to foreclose the loan (repaying the loan in full before the tenure of the loan ends), do check for foreclosure penalty if any.