Personal Loan EMI Repayment Schedule

How to Plan Your Personal Loan EMI Repayment Better

Personal loans have made our lives easier and more convenient. From tackling a medical emergency to planning a dream vacation with your family to renovating your house, you can get a personal loan and meet all your financial requirements without any hassles. And since personal loans are unsecured loans, you won’t have to put your assets on the line to qualify for financing.

However, one thing that worries many borrowers is personal loan EMI repayment. It’s very crucial to pay all your loan EMIs on time, or else your credit score can take a hit, and you could end up facing a lot of troubles. To avoid such a situation, you can follow the tips mentioned below to better plan your personal loan EMI repayments.

1. Borrow as per your repayment capability

It’s easy to get carried away while determining the personal loan amount that you should borrow. You might think that it’s a good idea to borrow a large sum of money and meet all your financial goals at once. However, taking such a step may leave you in a fix. Borrowing more than what you can repay can prove to be financially detrimental.

While borrowing a personal loan, make sure that you know the interest rate offered by the lender and the EMIs that you need to pay every month. You can use a personal loan EMI calculator to determine your EMIs based on your loan amount, interest rate, and tenure. You can make the necessary adjustments to reach an EMI amount you can easily afford.

2. Choose your loan tenure wisely

Another crucial step to planning your personal loan EMI repayments is choosing your loan tenure wisely. The EMIs that you need to pay for your loan depend on the loan amount, interest rate, and loan tenure. While the lender decides the interest rate based on your credit profile, you can adjust your loan amount and tenure to ensure that your EMIs are affordable.

Lenders usually provide personal loans with tenures of up to 60 to 72 months. If you opt for a higher tenure, your EMIs will decrease and vice-versa. However, the problem with a higher tenure is that you would have to pay greater interest on your loan. So, choose your loan tenure wisely and ensure it is neither too high nor too low.

3. Prepare an emergency fund to repay the loan

A usual way is to repay your personal loan through monthly EMIs. You should also ensure that you prepare an emergency fund to compensate and close your loan if the need arises. For example, suppose if you lose your job or meet with a sudden emergency resulting in substantial financial liabilities, you may not be able to continue your personal loan EMI repayments.

You can use your emergency fund to close your loan account in such situations. It’s like paying insurance premiums to prepare for a contingency. You can prepare this fund by investing in stocks, mutual funds, fixed deposits, gold, recurring bank account, etc.

4. Prepare a monthly budget and include your EMIs in it

Preparing your monthly budget is very crucial. It will help you in your personal loan EMI repayments and allow you to plan your overall finances in a better manner. While preparing your monthly budget, don’t forget to include your personal loan EMIs in it apart from your other monthly expenses, such as grocery charges, utility bills, school fees, house maintenance charges, etc.

Ideally, your total monthly expenditure – including your personal loan EMIs – should not exceed 70% of your monthly income. You can invest the remaining 30% of your income to make savings for the future.

5. Set payment reminders for your EMIs

It’s never easy to remember EMI due dates and make timely payments every time. So, what you can do is set monthly payment reminders for your EMIs on your smartphone. These reminders will send you alerts whenever your EMI payment is due so that you can make the payment immediately and avoid any chances of default.

You can also set up automatic EMI payments from your savings bank account. All you need to do for it is sign an auto-debit mandate form with your lender while borrowing the personal loan. But make sure that you have sufficient balance in your bank account so that EMIs can be debited automatically.

6. Know your EMIs in advance

Before applying for a personal loan with a lender, you must know the EMI you might have to pay for every month. Knowing your personal loan EMIs in advance will help you make an informed decision and determine whether you should opt for a personal loan or not.

To calculate your personal loan EMIs, you can use an online personal loan EMI calculator. You can enter your loan amount, tenure in months, and reducing annual interest rate in this calculator and then click on “Calculate EMI” to know your EMIs. You can also calculate your EMIs manually using the formula mentioned below:

EMI = [P x R x (1 + R) x N] / [(1 + R) N – 1], where P is the principal amount, R is the rate of interest, and N is the tenure in months.

7. Consolidate your debts

Managing EMIs of a single loan is always easier than managing the EMIs of multiple loans. Hence, instead of opting for several small-value personal loans, you can opt for a single high-value loan. If you have already taken more than one loan, you can use your personal loan to consolidate your debts.

This way, you can manage your personal loan EMI repayments better and enjoy lower interest rates on your debts. You can also transfer your outstanding loan balance to another lender offering lower interest rates and flexible repayment terms.

8. Maintain a healthy credit score

Your score determines your creditworthiness. A healthy credit score (750 or above) is necessary to qualify for availing of finances through a personal loan. A lender can also use your credit score to determine your personal loan interest rate, loan amount, and tenure. Hence, maintaining a good credit score is very crucial.

Even after you’ve taken a personal loan, you can’t be negligent towards your credit score. By maintaining a high credit score, you can ask your lender to extend your loan tenure or EMI dates. If you maintain an excellent credit score, the lender may also provide you with an EMI holiday facility.

9. Select the right lender

The interest rate levied by your lender will play a crucial role in determining your personal loan EMIs. You can’t control the interest rate offered by a specific lender, but you can choose a lender offering the lowest interest rate. This will help you minimise your personal loan EMIs.

However, the lowest interest rate should not be your only criterion while choosing a lender. You should also look at other factors, such as processing charges, repayment flexibility, personal loan eligibility criteria, late payment charges, etc.

Poonawalla Fincorp provides a gamut of loans at competitive interest rates and easy eligibility criteria. You can browse through our loan products and choose the one that’s best suited to your requirements.

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