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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Conclusion
Personal Loans make our lives easier in many ways when we require funds. But repaying it on time is crucial as well. Calculating and planning the Personal Loan EMI helps to determine whether one can afford the loan or not. So, by considering different factors like your income, expenses, and other financial commitments, repayment of EMIs can be easily planned. Moreover, potential financial setbacks must be avoided by proper EMI planning as late or missed payments can result in penalties and have a negative impact on your credit score.