Saturday, 20 October 2018

4 quick tips to manage your personal loan EMI better

Not all financial needs can be met through savings. Personal loans help people survive tough times and help in getting the funds that they need to meet their immediate cash requirements. You can depend on these loans for your child’s education, marriage, medical expenses or any other purpose. But taking a loan puts a responsibility on the borrower, that he needs to repay the loan amount through fixed monthly instalments. The borrower needs to make sure that he makes the payment on time. Failing to do so will not only attract penalties but also affect ones credit score negatively. Here are some tips that will help people manage the personal loans EMI in a better way.

Pre research

If you spend a little time in researching and comparing the various options of personal loans that are available to you, then this effort can go a long way in helping you manage your EMIs. Check and compare the personal loan interest rates offered by various banks, NBFCs as well as private lenders. Do not just go with the first personal loan offer that you receive. Even the bank with which you have a prior relationship may not offer you the best deal. So do your due diligence and find out the best available loan offer. You need not go physically to each bank to talk to the officials. Use the Internet to compare the different options that you have, and select the one that suits your needs. Since the interest rate is directly proportional to the EMI amount, a lower interest rate translates into a smaller EMI amount. So be a smart borrower and choose your option wisely. If you manage to get the loan at a comparatively lower rate, the EMI burden on the income will be less.

Pay attention to credit score

This tip also requires efforts prior to taking the loan. As you have seen above, managing EMI becomes easier when the interest rate charged on the loan is low. A good CIBIL score helps you achieve just that. A CIBIL score reflects how well a person has handled his past debt obligations. A high score reduces the risk that the lenders face while lending money. It helps in winning their trust that the borrower will repay the loan responsibly. But if you have a low CIBIL score, do not get disheartened. You may still get approved for the loan. There are many lenders who offer personal loan for low CIBIL score. But then before you take such a loan, you must be sure about your repayment capacity. A high interest rate translates into high EMI amounts. If you are not able to stick to your payment schedule your score will take a further hit.

Use a Personal Loan EMI Calculator

Using a mortgage calculator really comes in handy when you have to manage different aspects of EMI. It helps you decide whether you can repay the loan amount easily. So use a personal Loan EMI calculator to see how much monthly payment you will need to make, given a specific loan amount, interest rate and tenure. Change the loan period and see how it affects the EMI amount. One needs to choose an option that suits one’s pocket. Make sure that the total debt obligation that you need to handle in a month (EMIs of past loans + the EMI on new personal loan) does not exceed 50% of your salary. If it does, then you may have to increase the tenure of the loan to reduce the EMI burden on each month.

Contingency fund

One cannot underestimate the importance of rainy day funds when it comes to managing EMIs effectively. In case of any unplanned situation like a loss of job, or medical emergency these funds give one some breathing space. One does not need to worry about delays in EMIs. Usually, you must have enough savings that can service 3-4 months of EMIs. But these funds can be built up only when one takes care of his spending patterns. Make a budget and stick to it. Slowly build up reserves so that you don’t have to worry about any missed payments.

There is nothing wrong in taking a personal loan to fulfil one’s cash requirements. But it is important to make sure that one repays the loan diligently. Following the above tips will help you manage the EMIs well and follow a disciplined life.

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