5 Tips to Manage Personal Loan EMIs
In the modern-day world, money has become the epicentre of all our activities. Right from receiving higher education to getting married, from building a house to establishinga business, from enjoying a vacation to handling medical emergencies, every aspect of life requires us to shell out significant amounts of cash. However, we may not always be prepared for such expenses. In fact, sometimes we have to look elsewhere to arrange for excess funds. When the amount required is small, you may want to consider seeking help from friends and family. However, when there is a hefty sum involved, we can Take Personal Loans from banks and online lenders.
Since a Personal Loan is unsecured and can be easily procured in a matter of 1-2 days, it comes as a great respite, especially in urgent situations. That being said, repaying a loan requires some advance planning. Not only do you have to ensure the timely payment of the equated monthly instalment (EMI), but also need to manage day-to-day expenses. So, how should you go about this? Well, all you need to do is follow the simple tips mentioned below, and the management of Personal Loan EMIs will become easier than ever before.
1. Calculate the EMI Beforehand
In times of financial crisis, you may make a decision to opt for a loan, without understanding the long-term consequences. It is therefore recommended to take some time out to calculate the estimated EMIs before applying for the loan.
This can be quickly done by using a Personal Loan EMI Calculator available online. This will help you gauge the amount that you will need to pay per month towards the EMI. Depending on our financial situation, you can then analyse, whether you can truly afford the loan, If need be, you can also opt for a longer tenure to reduce the amount to be paid per instalment. This simple step can help you prepare for what lies ahead, and is sure to help you manage the loan more efficiently.
2. Restrict the EMI
As a rule of thumb, it is advisable that the total sum of EMIs to be paid per month should never exceed 50% of the total household income. Hence, it is vital to look for a loan offer that helps you enjoy the minimum possible EMI. To do so, it can prove to be a great idea to shop for better offers with lower interest rates.
Again, you may go for a longer tenure, but this will only increase the interest outgo in the long-run, and hence you should only take this measure only if outweighs the perks of paying smaller EMIs.
3. Look for Lower Interest Rate
It goes without saying, the lower the interest rate, the lower will be the EMI, and the easier it will be to manage the finances. It, therefore, makes sense to spend some time looking for the best loan offer at the lowest possible interest loans. Since Personal Loan interest rate usually varies from 11% to a whopping 22%, it is in your best interest to find a lender who can readily provide the loan at the cheapest rate.
4. Build a Credit Score
More often than not, your credit score acts as the most significant factor in the determination of the interest rate that you ought to pay. If you do not have a good credit score, to begin with, it may substantially raise the cost of the loan, putting an additional financial strain on you. In such a situation, it is recommended for you to wait for 4-6 months, and build a better credit score (minimum750).
5. Have a Contingency Fund
We often tend to use up all our revenues and income towards day-to-day expenses as well as our EMIs. However, we tend to postpone saving for rainy days. This may not be a good habit since, at the onset of an emergency, it can become excruciatingly challenging to manage the expenses, while still being able to pay the EMIs on time. To avoid getting into this fixated situation, it is best to have a contingency fund, which can be used as and when required.
It is essential to understand that missing out on an EMI payment is not an option, as it can severely impact your credit score. It is for this reason, that following all the above-mentioned tips is more than just necessary. After all, your current financial discipline will have a lasting effect on your future financial standing, and we all wish to be at our very best in this crucial facet of life!
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