When you take a personal loan, you make a commitment to your lender to repay the loan. And that means you take the responsibility of making timely payments towards your loan. To ensure that you honor your repayment commitment, it is a good idea to plan your repayment before you take the personal loan. Pre-planning your repayment is a proven way to avoid late fees and improve your credit score. It also reduces the stress of arranging your finances to accommodate your equated monthly installment (EMIs) at the last minute.
You can use the tips below to plan your personal loan EMI repayment with ease:
Borrow Only What You Need
A lender assesses your personal loan eligibility based on your credit profile. If you have been a good borrower, you are more likely to get a personal loan approval for an amount that is way higher than what you need. Don’t get tempted to give in; just borrow what you need.
When you take more than what you need, you unknowingly increase your repayment burden because the higher the loan amount, the higher the interest component, and larger is the EMI amount.
Research Well to Choose the Right Lender
Carry out thorough research before you decide to settle for the loan. Compare various lenders and the interest rates they offer. A comparative analysis helps you to choose a lender that’s doling out the offer with the lowest interest rate. A lower interest rate means a more affordable EMI. Also, check the fees associated with getting a personal loan such as processing fees, prepayment fees, late payment fees, etc. before choosing a lender.
Check Whether You Can Afford the EMI
If you want to plan your EMI better, one of the ways to do it right is to figure out what EMI you would be paying on the loan before you even take the loan. This step assesses your repayment capability and confirms whether or not you can afford the loan.
Once you have decided which lender to go ahead with, make sure you know the interest rate and the repayment flexibility your lender has offered you. Use this knowledge to know the EMI you would be paying throughout your loan tenure.
To make this task easy, a lot of lenders provide personal loan EMI calculators to instantly determine your EMI amount. Knowing your EMI amount beforehand helps you make better financial decisions and access whether or not you can afford to take a personal loan.
Choose the Correct Loan Tenure
The repayment tenure you choose impacts your EMI amount. Longer the repayment tenure, smaller are the EMIs; shorter the repayment tenure, larger are the EMIs. So, before you decide on the repayment tenure, consider your monthly income and your monthly expenses. This can help you decide how much income is at your disposal to pay your EMIs comfortably.
Keep Track of Deadlines
EMI payments are scheduled to be paid monthly on a particular date of the month. This date is communicated to you when you are signing the loan agreement.
Don’t miss even a single EMI deadline. Missing payments not only attract a penalty, but it also messes your credit score. Set payment reminders or sign up for payments to be pulled directly from your account every month on the scheduled date.
The 5 tips mentioned above can help you reduce your EMI burden, avoid late fees, be a responsible borrower, and boost your credit score.
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