There can be times in life when you urgently need the money, and you don’t have funds. Personal loans can save you from such situations. A personal loan seems extremely easy and instant while taking it. But not everyone knows how to manage personal loan EMI repayments. It is essential to analyse your interest rate, tenure and monthly instalment amount while taking the personal loan.
In upcoming sections, we will provide you with 5 personal loan repayment tips. These tips can prevent you from getting trapped in a financial crunch due to EMIs:
1. Calculate Your EMI Repayment Capacity
Your EMI will be assessed based on the interest rate and your preferred loan tenure. If you go for a longer-term, you might end up paying extra interest with less EMI amount and vice versa. Calculate the ease of payment for your EMI before committing to the loan. Many lenders provide an online EMI calculator to help you manage personal loan EMI.
2. Set EMI Reminders & Alarms
Typically, Your EMI will be debited from your bank account through ECS or PDCs. You might forget to keep a sufficient amount in your bank on the due date. But a bounced check or an ECS will reflect poorly on your CIBIL score for months. To manage personal loan EMI, put alarm or reminder before the due date of the EMI.
Many banks and personal loan providers send the message to their borrowers before a week of the EMI date to keep a sufficient amount in their account. Ask your lender company for such a facility.
3.Keep EMI Limited to a 40-50% percentage of Your Monthly Expense
It is imperative to keep EMI limited to 40-50% of your total monthly expenditure. So that you can easily manage personal loan EMI along with your regular monthly expenses. To achieve that, you might need to cut down on some recreational costs till the EMI tenure gets over. So sit back with your family and partner to figure out the suitable EMI for your budget.
4. A Longer Loan Tenure is Better
One irregular payment sits on your credit score for a long time. Thus, you can’t risk not paying EMI due to the budget crunch any month. If you run on a budget every month, it is better to apply for a longer tenure. Yes, it will pinch you a bit on the interest part. But you will be able to manage your monthly expenses without defaulting on your EMI.
5. Prepare a Backup Savings Fund
“Hope for the best but prepare for the worst” should be your mantra when managing personal loan EMIs. It is advisable to keep a backup saving fund to repay your EMIs. Despite the best financial planning, any medical emergency or unforeseen big expense can disturb your monthly budget. You can cut down on other expenses but can’s skip an EMI. Thus, having bonds, gold, or FDs in spare for financial emergencies is one of the most practical personal loan repayment tips.
Author Bio:
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.
