A personal loan acts as a lifeline during a financial crunch or an emergency. Unlike other loan types, a personal loan is a collateral-free and unsecured credit option. It requires minimal documentation and has a quick approval process. While it is easy to avail a personal loan, managing its EMIs may be tricky. Chalking out your personal loan repayment must be a top priority as failure to meet your EMI repayments can adversely impact your future finances.
Check out useful tips to manage your personal loan EMI –
- Evaluate your repayment potential
Firstly, to efficiently manage your EMI repayments, you need to evaluate your loan repayment potential. Ensure to learn about the rate of interest and repayment tenure offered by personal loan lenders. This data can assist you to compute your loan tenure and EMI amount. Many lenders offer online personal loan EMI calculators that you can use to get a better idea about your EMI. With such calculators, you can easily select the tenure as per your capacity to make EMI repayments.
- Maintain a contingency fund
It is recommended to form an adequate contingency fund for financial stability. In case of any financial exigency, you can simply resort to such backups to repay your EMIs by the due date. You can maintain your contingency fund in savings bank account, fixed deposit etc. Such instruments provide capital protection and quick liquidity during emergencies.
- Choose a tenure as per your repayment capacity
Loan repayment tenure plays an important role in determining your EMI outgo. You must set your tenure as per your repayment capacity. While lower repayment tenure infers higher EMI, it also results in lower interest and vice versa. Setting your EMIs at a comfortable and manageable level without impacting your finances is a prudent move. Your EMI outflow must be such that it does not lead to any adverse effect on your long-term investments and goals. In case you can afford to repay your personal loan quickly without creating any burden on your savings, monthly investments, and expenditures, you may choose a shorter repayment tenure as per your affordability. Doing so would save the interest cost.
You can calculate your personal loan EMI as per your repayment capacity, using an online personal loan EMI calculator. For using the calculator, you do not need to have any prior knowledge. You just need to enter the asked details by the calculator and it will display the result in seconds.
- Build a strong credit score
Maintaining a strong credit score assists lenders to decide your credibility. Suppose you have a score of 750. In such a case, it may be easier for you to secure a loan at a lower personal loan interest rate, which lowers your loan EMIs. Note that paying your EMIs by the due date can further allow you to maintain a strong credit score.
Whether you are salaried or self-employed, you can apply for a personal loan to solve your financial emergencies. While regular personal loan lenders tend to disburse the loan in 2-7 days, instant or pre-approved personal loans may be disbursed on the same day of the application. Such instant disbursals are helpful during urgent financial requirements. However, note that as they are instantly available, lenders may charge higher personal loan interest rates to compensate for the risk. Thus, if you can wait for up to a week, it is best to avail regular personal loans as they come with lower interest rates than instant loans. A lower interest rate on a personal loan allows you to save on the total interest cost.