Essential Tips to Help You Better Manage Your Personal Loan EMI Payments
Published on : June 07, 2021

We have varying financial needs. While it may be a medical emergency for one, it could be education expenses for another. It could simply be a discretionary spend like a new gadget or a vacation too. All expenses cannot be put off for tomorrow when you have sufficient savings in the bank. Some expenses may be imperative right now. A personal loan bridges this cash gap.

Since a personal loan is an unsecured loan that can be used for any purpose, it is the ideal loan to meet your various needs that do not fall under a specific category. 

Personal loans are cheaper than credit cards. It is more prudent to apply for a personal loan when you have a planned expense than to swipe your credit card unless you plan to pay it off within the credit period itself.

Though a personal loan can help you to tide over your immediate financial requirements, you must bear in mind that it needs to be repaid on a monthly basis in equal instalments without any delay or default. It is a responsibility and you will need to adhere to it to maintain your credit score.

The first step you need to take when you contemplate a personal loan is to use a personal loan EMI calculator to establish the optimum loan amount that you can afford and the ideal tenure over which you can comfortably repay. There is no benefit in taking a higher amount than you actually require  because you need to service the loan with a higher monthly outgo.

Personal Loans at LoanTap start with an interest rate of 18%. They are available for amounts ranging from Rs 50,000 to Rs 10,00,000 and the tenure could range from 6 months to 60 months. Any Indian citizen or resident over the age of 21 and earning a monthly income of Rs 30,000 or more is eligible for a personal loan with us.

So, taking a personal loan is not difficult if you meet the above criteria. It is the repayment of the loan that needs a lot of responsibility and self-discipline. It goes without saying that the loan needs to be repaid on time. You cannot afford a single default as that would impair your credit score and your ability to borrow in future. Having a good CIBIL score preferably over 750 is a very important criterion to improve your chances of approval and to fetch better terms of service on your personal loan. 

How do you ensure that you pay your EMIs on time? Let us explore a few tips that will help you in this regard.

Use the Personal EMI calculator to estimate your repayment capacity

The importance of a personal loan EMI calculator cannot be emphasized  enough. While the amount of loan is usually determined by the estimated expenses or needs and the interest rate is decided by the lender, the only variable that is entirely in your control is the tenure of the loan. Altering the tenure of the loan can change the monthly EMI. If you are having a low income and have expenses to be met, you are better off opting for a longer tenure. This will reduce your monthly outgo without pinching your pocket or hampering your lifestyle. 

Do not pay more than 50% of your monthly income towards EMI

It is important to ensure that the sum total of your monthly EMIs never crosses 50% of your monthly income. You need to draw a line in the sand here and never allow this threshold to be crossed. This will ensure that you have money left over to meet your normal living expenses. It is important to work this out upfront else you would end up borrowing from X to pay Y which is not a desirable situation at all. 

Do not treat credit card as an extension of your payslip

A credit card is not an extension of your payslip but unfortunately, most people do not understand the dangers of falling into a credit trap. The lure of easy finance and the availability of tempting marketing offers is too good to resist for most people. They end up buying things they don’t need. Being a shopaholic has its own disadvantages. Owning multiple credit cards is an even bigger danger as you will end up using one to pay off the due on another and before you realise you may be swamped by the multiple payments that will fall due. Credit cards are useful only as long as you pay them off in full within the credit period. Else you may be subject to interest charges at hefty rates of 24-30%. You are better off

planning your expenses and using an Instant personal loan to tide over a cash crunch whenever the need arises.

Create a contingency fund

As soon as you start earning, it is important to put aside a sum of money to provide for a rainy day or unforeseen circumstances. As a thumb rule, you should never spend everything you earn. Creating a contingency fund is the topmost priority before you decide to splurge on yourself. Imagine a sudden mishap or medical emergency in the family or a sudden loss of a job. You will need funds to tide you over while you are searching for your next job. However, the EMI payments won’t stop. They will fall due every month. So, it is important to squirrel away savings every month when you can so that you can tide over lean months comfortably.

Maintain a good credit score

The importance of having a good credit score can never be elaborated enough since it keeps your line of credit open in an emergency. Defaulting or delaying EMIs show up negatively on your credit report and hamper your chance of getting a loan when you really need it in future. It is therefore important to manage your personal loans responsibly and repay them on a monthly basis.

Prepayment or foreclosure of the loan

Based on your repayment capacity, you can select the longest tenure of loan possible at the time of application. This will keep your EMIs low. Once you have paid them for 6 months, you have the option of prepaying the balance in full or part with no additional charges. Even a part prepayment can bring down the EMI considerably. Any future cash inflow like a bonus or salary increment can be used to reduce the loan amount. This method will ensure that you manage the loan prudently and in a relatively stress-free manner.

Do a complete study of the market before selecting a lender

There are schemes available around the year and especially during festivals. If you are planning to take a personal loan, it would make sense to compare different lenders and take the best offer available. This would help you  take advantage of lower interest rates offered. It is important to be informed and aware while making the most prudent financial decisions.

Set up a monthly reminder to fund the account from where the EMIs are paid

If you have been given an eNACH mandate, it is your duty to keep the account sufficiently funded before the EMI falls due. Failure to do so will result in dishonour of the instrument. This can attract penalties and is punishable by law as well. It is better to be careful and keep the account funded a day before the due date. You may set up a reminder on your phone to do this every month since you may be busy with your daily life  and the date may inadvertently slip your mind.

Managing your personal loan repayment EMIs is a matter of self-discipline and you must ensure that you inculcate this habit. Failure to do so may lead to grave issues that are best avoided. It is quite easy to comprehend the convenience of working out the optimal EMI and paying it on time. This goes a long way to help you stay stress-free even when you have a loan to pay. For details on how to apply for a personal loan, our team at LoanTap is available to guide you through. All you need to do is to visit our website and fill up an application form along with the basic documents. If everything is in order, your loan is disbursed within 24-36 working hours. It is that easy. Relax and check out LoanTap for all your personal loan needs. We are here to make life easy for you.

Related blogs – A Guide to Understanding Loan Repayment Plans offered by LoanTap