Individuals avail personal loans to meet their financial requirements related to wedding, education, medical emergency, home renovation, etc. However, it is crucial to make timely repayments, failing which might adversely impact the financial health and stability of the borrower. Loan defaults are reported to credit bureaus which in turn reduces the creditworthiness of the borrower. This makes it difficult for them to avail loans in future. In order to avoid the risks associated with late repayments one can follow the below mentioned strategies to plan their repayments properly and prevent any default or loan repayment failure.
Tips to Ease your Personal Loan Repayment
Repayment Capacity
Individuals should avail personal loans as per their repayment capacity. The minimum monthly income required to avail personal loans is Rs 15,000. The total EMI of the individuals availing personal loan should not exceed 50-55% of their net monthly income. Availing personal loans as per your repayment capacity will help you meet your repayment schedule without compromising your financial obligations.
Emergency Funds
Emergency fund refers to the cash reserve that acts as a cushion in case of financial emergencies, thereby, reducing financial stress. Individuals may use the emergency fund in case of a sudden financial crunch to meet their regular expenses without disturbing their savings or crucial investments. Emergency funds also prevent the borrowers from taking new debts in case of financial instability. This allows them to continue making their loan repayments on time, thereby, avoiding any penalties.
Prepay your Personal Loan
Personal loan borrowers should make small prepayments whenever they have surplus funds. This reduces the outstanding principal, total interest cost and the residual loan tenure, thereby, reducing the EMI burden. This not only eases the personal loan repayment but also helps in faster loan repayment.
Create a Budget
Creating a financial budget helps the borrowers to track their monthly expenditure and savings. You can evaluate your expenditure and avoid unnecessary expenses, thereby, prioritizing your EMI in your monthly budget plan. Thus, you will have sufficient funds to repay your monthly installments.
Personal Loan Balance Transfer
Existing personal loan borrowers can avail Personal Loan Balance Transfer facility to transfer their existing personal loan accounts to lenders offering lower interest rates. This reduces the overall interest cost allowing the borrowers to manage their repayments more efficiently. Borrowers can also opt for longer loan tenure, thereby, reducing their monthly installments. However, this might increase their overall interest cost.
Automate your Loan Repayments
Personal loan borrowers can set a standing instruction or auto debit facility from their savings account in order to ensure timely EMI repayments. The amount will be automatically deducted from their savings account and they will never miss the due date.
Conclusion
In order to ease the personal loan repayments, borrowers require effective financial planning. Failure in making timely repayment results in late payment fees, thereby, negatively impacting the credit score. By adopting the above mentioned strategies, borrowers can plan their repayments efficiently and maintain a healthy financial profile. Note that, timely loan repayment improves your credit history and increases your chances of availing loans in future at a low interest rate.
