Introduction:
There are situations where a significant amount of money is required, such as for home renovations or purchasing a vehicle, and the most desirable loan option in such cases is Equated Monthly Installments (EMI). Using an EMI loan, one can easily make expensive purchases and pay them in affordable instalments.
However, handling such large sums of money can be a challenge. But worry not, as this blog guides you on the smart ways to manage EMIs. So, hold on tight and ride through the blog to learn more.
Get a Loan Amount that Fits Your Budget
The first step in taking a loan is to identify ‘what loan amount fits you the best?’ For instance, if you take a 5 lakh loan that is outside your budget, you will have a hard time repaying it; it’s essential to remember that failing to pay your loan on time or defaulting on it can lead to penalties and other severe consequences.
The instalment amount you need to pay is directly linked to your loan, so ensuring you can afford it is crucial. You should only take a loan for necessary expenses because a more significant loan will result in higher interest costs and a larger EMI obligation. Choosing a higher loan amount because you are eligible is not wise or financially responsible.
FatakPay small credit and EMIS are convenient, easy and flexible ways to apply. You get easy repayment options that help you to manage the EMIs.
Ensure Regular and Timely Payments
The previous section mentioned the severe consequences of not repaying your loan on time. In this section, we will discuss the impacts of late payments and how to avoid them.
Late payment can increase the overall cost of your loan due to penalties and charges. Additionally, it can make it harder to pay subsequent instalments. Late payments create a negative impact on your credit score, which can take a long time to recover. To avoid these consequences; it is crucial to prioritize timely payments.
To ensure timely repayment, a simple trick is to set aside the EMI amount in a separate account as soon as you receive your salary or income. This way, you can be assured that you will have the necessary funds to pay, regardless of when your EMI is due.
Aim to Pay More than the EMI Amount
Paying over and above your EMI amount when you have surplus funds reduces your overall expenditure. You can decrease the principal loan amount by spending more on your monthly personal loan.
This, in turn, will lead to a reduction in interest payments as the outstanding amount shrinks. Not only will this relieve you of the burden of paying high EMIs, but it can also quicken the loan repayment process. Therefore, assess if you can free up any additional funds and assign them towards your loan.
Nevertheless, remember that some financial institutions may impose prepayment or foreclosure charges if you decide to settle your loan earlier. Before finalizing making extra payments towards your loan, please verify with your lender whether such payments would negate any savings you stand to make.
Select a Suitable Loan Tenure
Selecting an appropriate loan tenure ensures you can manage your EMI comfortably. Your repayment period and EMI amount have an opposite relationship. Choose a longer personal loan tenure. Your instalments will be smaller because the outstanding amount is repaid over a longer time.
However, it is essential to note that the longer the repayment tenure, the higher the interest; you will have to pay interest on the remaining loan amount for a more extended period.
On the other hand, a shorter tenure will reduce your interest outgo but increase your EMI amount significantly. Therefore, it is crucial to assess your personal finances and income flow and create a feasible EMI plan.
It would help if you chose a shorter loan tenure to save money by paying less interest. Alternatively, a longer repayment tenure is ideal if you find producing a more giant EMI challenging.
Use a personal loan EMI calculator to determine the monthly instalment amount associated with different loan tenures. You can choose a tenure that allows for affordable payments by doing so.
Negotiate with the Lender for Better Rates
With a strong credit profile and a positive credit score, isn’t it within your power to negotiate with your lender for more favourable 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 with high creditworthiness, which shows 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 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 it more manageable.
Try to Reduce Your Monthly Expenses
How can you make paying back your loan easier? Reduce your monthly expenses to make your payments more manageable. This will also free up cash for additional fees, lowering your loan amount and interest costs and accelerating repayment.
Analyze your income and expenses and reduce luxury spending to pave the way for a smoother loan repayment journey.
In addition, find cost-saving options for your essential expenses and be proactive about reducing your subscription service bills until you repay your loan. By implementing these strategies, managing your loan EMIs will become easier.
Before making decisions, compare different loan options and carefully review the terms and conditions. Being well-informed is the first step to becoming a smart borrower who can handle loan repayment effectively.
Create Separate Funds For EMIs
How about you create a separate fund dedicated to your loan EMIs to ensure timely repayments even during unforeseen financial emergencies?
Create a separate account specifically for your savings. Utilize this account exclusively for your EMI payments. Keeping these funds in this account is crucial to manage your loan payments effectively and efficiently.
Opt For Debt Consolidation
Suppose you are paying EMIs for several small and big loans at a time. In that case, you will need help remembering the date of each loan EMI, and you may miss your payments occasionally. In such a situation, a personal loan for debt consolidation can be ideal.
With debt consolidation, you can take out a single loan to pay off all your previous debts and manage your payments more effectively. This method eliminates the need to deal with multiple lenders, allowing you to focus on just one loan. As a result, you only have to make EMIs for the new loan, which helps you manage your finances better.
Increase Your Emi Amount If Possible
Don’t numerous NBFCs provide flexible repayment terms for your convenience? If you have received a salary increase or taken on a part-time job, you could utilize the extra income to pay off your loan faster. You could ask your lender to increase your EMI amount so that you can repay the loan quickly and become debt-free.
However, if you face difficulties managing your EMIs, consider asking the lender to increase the number of EMIs and reduce their amounts to make them easier to manage.
Create A Contingency Fund
Even with careful expense planning, can anyone predict and prevent unforeseen events? Missing a single housing loan EMI payment may label you a defaulter and negatively affect your credit score.
To avoid this, a contingency fund is recommended because it can help cover at least three consecutive EMIs in emergencies. Start building this fund in small instalments once your loan gets approved.
Personal loans can help fulfil your aspirations, and you can use the tips mentioned above to manage your EMI payments better, which, in turn, can lead to stress-free financial well-being.
Conclusion
Managing EMIs effectively is critical for a hassle-free financial journey, mainly while dealing with significant loans for significant expenses. This blog presents innovative strategies that comprehensively guide you through the complexities of managing EMIs wisely.
Choosing a loan amount that aligns with your budget, followed by regular and timely payments, is essential to avoid penalties and negative impacts on your credit score. Additionally, paying more than the EMI amount can help reduce overall expenses and expedite the loan repayment.
Moreover, the blog suggests exploring debt consolidation for those managing multiple loans to streamline payments and simplify financial management. The suggestion to increase EMI amounts in case of additional income is also proposed, offering a proactive approach to faster debt clearance.
About FatakPay:
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