Multiple instant loan options are available in the market, from home loans, personal loans, car loans, cash loans, and bike loans. Out of these different types of loans, the most common one people opt for is a personal loan. The reason for this is that it does not require you to give any collateral to obtain a personal loan. However, taking up a loan without any thought behind it is not a wise thing to do. It would be best to look at your financial position before committing to a personal loan because an inability to pay them will adversely affect your credit history and future financial plans.
Tips for Personal Loan EMI Management:
Considering these tips to manage the EMIs or Equated Monthly Instalments better will help when you take up an instant personal loan online:
1) Assess Your Loan Requirement in Advance:
The first step is to ascertain the amount of loan you will require to meet the purpose of taking the personal loan. It is always better to take only as much as you need and how much you can pay back every month. The amount you borrow will determine the monthly EMIs you have to pay. Don’t borrow more than you require, as it will overburden you financially.
2) Ensure to Opt for a Loan with Lower Interest Rate:
You may get many different personal loans offers with varying interest rates and other terms as there are many online lenders. But, always ensure that you take a personal loan that gets offered at lower interest rates. Taking an online personal loan with the lowest interest rate will ensure that your monthly installments are less, as it directly reduces the cost of borrowing. And this helps you to reduce and save money in the longer term.
3) Keep Your Loan EMIs within 50% of Monthly Income:
The total of your entire existing loan EMIs should not be more than half or 50% of the income you get every month. Following this tip is critical because otherwise, you will end up juggling your finances and may miss other monthly monetary commitments. Moreover, it is vital to manage your finances well; otherwise, it could create stressful situations for you and your family.
4) Always Create a Corpus of Emergency Funds:
An emergency can creep up anytime in your life, so keep aside some emergency funds. This saving will help you in times of crisis or any urgent requirements. In addition, you can use this fund to take care of your monthly installments of personal loans online. There are several options you can do to create this fund, like saving in recurring deposits, fixed deposits, gold investments, equity investments, and others. This backup option will always help you manage emergency times better and provide you with a financially stable future.
5) Keep a Check on Your Monthly Expenses:
When you have an ongoing monthly EMI, which you have to pay, it is always better to keep track of all other expenses you incur. However, there may be certain expenses that you need to curtail so that you have more flexibility with your money. Ensure you pay the monthly installments first and treat this as the priority expense before any other extracurricular spending. As much as possible, consider which expenses to curtail before you apply for an instant personal loan. This way, you can manage your finances and loan EMIs better.
6) Choose a Longer Repayment Tenure:
You may feel that the sooner you can finish the loan, the sooner you will be free of the financial obligation of paying monthly EMIs. However, that is not the case, as you may overburden yourself even more instead of reducing the burden. This reasoning is because your EMI is inversely proportional to the number of months you take to repay the loan. So, decide the tenure based on your monthly income and the monthly expense budget you will need to meet. It may help you manage your finances better if you take the loan for a longer repayment tenure.
7) Check the Prepayment or Foreclosure Terms:
Ensuring the possibility of a foreclosure of your online personal loan is a significant factor that can save you money. This term means that you will be able to pay off the loan earlier than the specified duration when you have extra cash with you. Prepaying a loan even in more significant parts than the existing monthly installment will significantly reduce the EMI amount and the time of the payback process. In addition, it will help you to manage and become free of the obligation earlier.
8) Maintain a Monthly Reminder Setup:
Setting a reminder in your calendar a few days before the due date of the EMI may seem unnecessary, but it is a vital tip for you. This reminder will help you keep track of the due date and ensure that you don’t miss the EMI of the personal loan online payment. Missing an EMI can significantly negatively impact your financial future as these missed EMIs reflect in your credit score and may reduce the overall points. In turn, a low credit score will affect your possibility of securing any loan in the future.
9) Reduce the Use of Credit Cards:
Credit cards have a higher rate of interest than personal loans, and the monthly installments you end up paying adds to the financial burden every month. Moreover, if you overuse a credit card, it affects your repayment capacity adversely. So, to better manage your finances and the monthly EMIs, it is advisable to reduce their usage.
Conclusion
There are several factors why it is crucial that you carefully manage the EMI of the personal loan. First, these instant loans can help you improve your credit record or be harmful if not appropriately handled. Therefore, make sure you take steps starting from the application process and ensure that the very last installment gets paid on time. Most importantly, ensuring that you follow the above points will make your financial future brighter and happier.