A personal loan is an unsecured, collateral-free loan borrowed at a fixed interest rate and repaid over time.
While a personal loan these days is fairly easy to avail of, repayment via Equated Monthly Instalments (EMIs) is an added expense that calls for considerable planning and commitment.
Given the mounting costs of living, squirreling away a portion of your monthly earnings for paying the installment can be like walking a financial tightrope.
Luckily, there are ways in which you could lower the EMI burden of your personal loan. Here are seven smart tips you could use:
1. Choose the Best Option
While there are dozens of lending institutions giving out unsecured personal loans, you ought to choose one that fits your specific needs best. Compare lenders based on their interest rates, loan tenure options, application procedure, eligibility criteria, and charges like processing fees, foreclosure charges, late EMI penalty, etc.
2. Borrow Only as Much as You Need
The EMI amount depends directly on the loan amount you have borrowed. Thus, the best way to keep it to the minimum is to borrow funds according to your requirement, not a penny more. Remember, circumstances can change quickly, and even if you can borrow more than you need today, repaying the loan may get tough tomorrow.
3. Cut Down on Expenses
Since the EMIs have to be paid anyway, it makes perfect sense to cut down on superfluous expenses. From cancelling subscriptions you don’t use – streaming services, gym, magazines – to shopping and eating out less frequently, there are so many areas you could save. These savings can be used to repay your loan before time – the next tip – and thus help lower your EMI burden.
4. Make a Prepayment
If you have the cash to spare, you could opt for a loan fore-closure by repaying the outstanding balance along with any pending dues. While a partial prepayment will help bring down the principal loan amount and save you from paying the interest cost, a full prepayment aids you in getting rid of the loan EMI burden altogether.
5. Opt for the Right Repayment Tenure
When you opt for a longer loan tenure –the stipulated duration of repayment – the EMI is significantly minimized. But a longer loan tenure also means paying more in the form of interest. On the other hand, a shorter loan tenure with a sizable EMI amount ensures a lower interest cost and faster loan repayment.
Either way, you need to figure out your monthly budget and go for the most appropriate EMI in the shortest loan tenure possible.
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