Our lives have become simpler owing to personal loans. You can quickly obtain a personal loan and meet your financial needs, from handling a medical emergency to organizing a dream family vacation to upgrading your home. In addition, you won’t need to put your investments on the line to get approved because personal loans are unsecured loans.
However, the payment of personal loan EMIs is something that many individuals are concerned about. Therefore, it’s imperative to pay all your loan EMIs promptly; otherwise, your credit score may suffer, and you may find yourself in many difficulties. You can plan your loan EMI repayments more effectively by using the advice provided below to help you avoid this problem.
While deciding the amount of money you should take in a personal loan, getting carried away is simple. You may feel tempted to take a sizable loan to achieve all of your financial objectives at once. But, adopting this action can put you in trouble. You may face a financial hazard by taking on more debt than you can handle.
Be sure to understand the EMI you must pay monthly and the interest rate before taking a personal loan. Then, based on the loan amount, interest rate, and tenure, you can calculate your EMIs using a personal loan EMI calculator.
Making a sensible decision about your loan tenure is another essential step in organizing your loan EMI installments. The loan amount, term, and interest rate — all of these factors influence the EMI you must pay. Therefore, you can choose your loan amount and tenure to ensure that your EMIs are affordable while the lender determines the interest rate based on your credit history.
Lenders offer personal loans with different terms. Your EMI increases if you choose a shorter period and vice versa. The issue with a longer tenure is that you will have to pay more in the form of interest, although your monthly loan payments will be less. You can opt for a longer tenure if you want more monthly liquidity. If you wish to be debt-free at the earliest, choose a shorter tenure with higher EMI payments. So decide your loan term carefully, ensuring it is neither too long nor too short.
Typically, loans are paid back in monthly installments. Additionally, ensure that you have an emergency fund set up so that you can pay off your loan in one go and close it if the need arises. Assume, for instance, that you lose your job or experience a sudden emergency that leaves you with significant financial obligations. In either case, you may be unable to continue making your monthly loan payments.
You can end your loan account using the emergency fund in such circumstances. It is comparable to purchasing insurance to cover a potential occurrence. This fund can be created by investing in securities such as equities, mutual funds, fixed deposits, gold, and recurring bank accounts.
Setting up a monthly budget is essential. It will enable you to organize your overall finances better and assist you in making EMI repayments on personal loans. Apart from your other monthly expenses, such as grocery bills, electricity bills, school tuition fees, and house maintenance costs, don’t forget to add your loan EMIs while creating your monthly budget.
Your overall monthly expenses, including personal loan EMIs, should not be more than 70% of your monthly income. Then, to save for the future, you can invest the remaining 30% of your income.
Remembering EMI due dates and consistently paying on time is never simple. You can therefore use your smartphone to set up EMI monthly payment reminders. These reminders will notify you whenever your EMI payment is due so that you can pay it on time and lower your default risk.
Additionally, automated EMI payments from your savings bank account are possible. Sign an auto-debit mandate form with your lender while taking out a personal loan. To ensure that EMIs are automatically deducted from your bank account, make sure you maintain a sufficient balance.
You should know the EMI you must pay each month before applying for a personal loan with a lender. You can decide whether to take a personal loan by knowing the amount in advance. You can proceed with the loan if you think you can afford to include the monthly payments in your expenses.
You can use a personal loan EMI calculator online to figure out your monthly payments on a personal loan.
The EMI of a single loan is always simpler to manage than the EMIs of several loans. Therefore, you can choose one high-value loan rather than multiple small-value personal loans. You can consolidate your obligations using a personal loan if you’ve already taken out multiple loans.
You can better manage your loan EMI payments this way. Another option is to refinance your outstanding loan debt with a different money lender who offers more lenient repayment conditions and a cheaper interest rate.
You are deemed creditworthy based on your credit score. To be eligible to borrow money through a personal loan, you must have a good credit score (750 or more). Your personal loan’s interest rate, available size, and repayment period can be determined by the lender using your credit score. Therefore, maintaining a high credit score is essential.
You cannot neglect your credit score even after you’ve taken a personal loan. You can request an extension of your loan term from your lender by keeping a high credit score.
Your loan EMIs will be heavily influenced by the interest rate charged by your lender. Although you have no control over the interest rate a given lender offers, you can select the lender with the lowest rate. Your loan EMIs will be low as a result.
But, the lowest interest rate should not be your sole consideration when selecting a loan. One should also consider other elements such as processing fees, repayment options, personal loan eligibility requirements, and late payment fees.
As discussed earlier, it is advisable to create an emergency fund by investing your money in different investing opportunities. This helps you clear off the loan without much trouble, even when facing a financial emergency. P2P lending offers a high-return and low-risk investing opportunity. You can invest in LenDenClub’s FMPP plan and get a return of 10–12% per annum. The platform hyper-diversifies your invested amount, lowering your risk. You can start investing in this plan with as low as ₹ 10,000. Invest Now!