With the economic depression the country is currently going through, the expenses are higher compared to the income levels. This arises the need to apply for instant personal loans from banks or non-banking financial companies (NBFCs). Personal Loans are one of the best products for all kinds of financial assistance. They are often unsecured in nature i.e. you do not have to provide any collateral as security against the loan. Also, there are no restrictions on the utilization of loan funds. The maximum tenure allowed to repay personal loans is five years. Many banks and lending institutions also offer personal EMI calculators to organize loan repayments with ease. However, in such times many people find it difficult to repay the loan amount as the equated monthly instalments (EMIs) take a toll on their monthly incomes. However, repayment of instant personal loans can be less tedious if you follow the below steps towards lowering the loan burden. These include:
- Personal Loan Balance Transfer
Transferring your high-interest instant personal loans to a low-interest loan opportunity helps in repaying your loan faster. However, this is possible when you enjoy a good credit score, thus, allowing you to save on your overall interest cost while also reducing the EMI loan amounts to be repaid. A balance transfer is a provision under which you can transfer your existing personal loan to a new lender for a better interest rate of offers on loans. The option works well if you want to get approved for a higher amount at a lower interest rate. With the personal loan balance transfer facility, your previous outstanding balance is completely closed, you’re offered a higher loan amount and a more flexible repayment tenure – all this at a lower interest rate. That said, it isn’t the best option if you want to close your personal loan early but it can still be considered as an acceptable option.
- Full Prepayment Of Loan
If the loan repayment is done in full then it can be done relatively early into the tenure of the loan, a borrower tends to save a lot on the interest. A personal loan generally has a lock-in period of about 1 year after which the outstanding loan amount can be prepaid. Many banks will allow you to prepay your instant personal loans without any charges provided you pre-pay using your funds. As such, prepayment of your loans can bring down your monthly instalment burden without any additional charges. Most banks levy some charges on prepayment of the loan. Compare the rate of interest that you’ll save with the cost of prepayment and then decide accordingly. If your lending institution permits, you can also choose to make a part payment. It will help reduce your EMIs and tenure of the loan
- Debt Repayment in Higher Interest Rates
The availability of multiple loans and credit card options resulted in an increasing number of people falling in a debt trap. An instant personal loan charges more interest than other loan repayment options on loans. To ensure timely repayment of all the loan amounts taken. Hence, it is important to prioritise debt repayment in higher interest rates. This means that the personal loans must be repaid before paying the EMIs of all other loans.
- Increase Repayments with Rising in Income
Whenever there is a rise in your income or you get extra money with you you can opt to repay your loans faster by increasing the EMIs. Assuming that you get an 8% raise, you can easily increase your loan EMIs by 5%. If you raise the amount of your monthly personal loan instalment, it would not be wrong to say that the outstanding balance of your loan will decrease and you would be able to pay the complete amount and close your loan faster. Nevertheless, the monthly burden will be increased for a certain period but you can eventually end up paying your loan faster and be debt-free.
- Lower Your Expenses
To reduce your loan burden, you need to make some lifestyle adjustments to accommodate your loan repayments and ensure you have enough money to pay higher EMIs. Cutting down on luxuries and unwanted spending can save a lot of money that can move towards paying loan EMIs. Diligent savings & investments right from the beginning will help create a good fall back for any expenses that would come up in future.