A Personal Loan offers a convenient avenue to address financial requirements without putting your assets at risk. Whether it is handling emergencies or realising your aspirations, a Personal Loan caters to diverse needs. However, it is essential to recognise that the EMIs associated with a Personal Loan can become an added monthly expense. Without careful financial planning, they may strain your budget and feel burdensome. Read this blog to know effective strategies on how to reduce your Personal Loan EMIs, alleviating financial pressure.
You can significantly reduce your EMI burden by implementing these 7 smart strategies:
1. Borrow Only as Per Your Requirement
Personal Loan apps provide instant Personal Loan with minimal documentation. These facilities may tempt you to avail of a Personal Loan even if you do not have an immediate requirement for finances. However, this cannot be termed a good idea, as it will unnecessarily burden your monthly budget. You should opt for a Personal Loan only when you need urgent finances.
You should choose the loan amount as per your requirements. You should neither choose less nor more than what is required. This way, you can save yourself from paying unnecessary high EMIs.
2. Choose an Appropriate Loan Tenure
Your loan tenure is one of the significant factors that impact your Personal Loan EMIs. Personal Loan tenures usually range between 12 and 60 months. If your lender agrees, you can also get a Personal Loan with a higher tenure. It is crucial to choose an appropriate loan tenure so that your EMIs remain affordable.
By opting for a longer tenure, you can spread your repayment over a more extended period, significantly decreasing your Personal Loan EMIs. However, choosing a longer term may lead to a higher interest amount than what you would have paid for a shorter tenure. Hence, it is necessary to strike the right balance between your Personal Loan tenure and EMIs. Just make sure that your EMIs are neither too less nor too high so that you can pay them every month without any hassles.
3. Opt for The Fixed Rate of Interest
There are two types of interest rates levied by lenders on a Personal Loan – fixed interest rate and floating interest rate. In the case of a fixed interest rate, the Personal Loan interest rate remains the same throughout its tenure.
On the other hand, for the floating interest rate, your Personal Loan interest rate can change during its tenure as per the changing Reserve Bank of India (RBI) guidelines. If the interest rate goes up, your loan EMIs would also go up. That is why it is better to opt for a Personal Loan with a fixed interest rate. This will allow you to plan your EMI repayments better.
4. Make Part Prepayments Whenever Possible
Making part prepayments of your Personal Loan will reduce the principal amount and thereby reduce your EMIs. So, try to make part-prepayments of your Personal Loan whenever possible. You can leverage the bonus from your employer, interest from your investments, etc, to make part prepayments of your Personal Loan
However, your lender may charge you a nominal fee whenever you make part-prepayment of your Personal Loan. Usually, this fee ranges between 1 to 3% of the outstanding loan balance. It is prudent to confirm the prepayment charges with your lender before applying for a Personal Loan.
5. Read the Fine Print Carefully Before Applying for the Loan
Several lenders levy some hidden charges on a Personal Loan, which include processing fees, late EMI penalties, cheque bounce charges, etc. These charges may increase your Personal Loan EMIs. Thus, it is essential to read the fine print before applying for a Personal Loan. This will help you understand all hidden charges levied on your loan and make an informed decision. You can also ensure that you do not miss any EMIs of your Personal Loan so that you do not have to incur these hidden charges.
6. Choose Your Lender Carefully
The interest rate levied by the lender is a major factor that decides your Personal Loan EMIs. You must try to get a Personal Loan at the lowest interest rate. For this, you need to compare Personal Loan interest rates offered by various lenders and opt for the one that suits you the best.
You can also negotiate with your lender to reduce your Personal Loan interest rate if you have a good credit score. However, the lowest interest rates should not be your only criterion when figuring out how to reduce the EMI of an existing Personal Loan. You should look at other factors, such as loan tenure, repayment flexibility, customer support, etc.
7. Debt Consolidation
If you have multiple high-interest loans, consider consolidating them into a single Personal Loan with a lower interest rate. By consolidating your debts, you can streamline your repayment process, alleviating the stress of juggling multiple payments and due dates every month. It will not only simplify your financial obligations but also reduce the risk of missed payments.
Opting for a Personal Loan for debt consolidation often results in a lower overall monthly payment, making it easier to budget and manage your finances effectively. With a reduced interest rate, you can save a significant amount of money over the tenure of the loan, allowing you to allocate those savings towards other financial goals or emergencies.
Managing your Personal Loan EMI does not have to be a burden. By implementing these smart strategies to reduce your Personal Loan EMI, you can gain control of your finances and find yourself on a path to financial freedom. Poonawalla Fincorp offers affordable Personal Loans with minimal documents and competitive interest rates. Apply Now!
1. What factors influence the EMI of a loan?
Several factors play a role in determining your loan EMI. The primary considerations include the interest rate and the duration of the loan. Additionally, factors such as the loan amount and the down payment made also impact the EMI amount.
2. Is it worth paying off a personal loan early?
Yes, by paying a Personal Loan early, you can save the interest and free up your money for a monthly budget.
3. What is the impact of the down payment amount on lowering my loan EMI?
The impact of your down payment on reducing your loan EMI varies depending on your lender's terms and the type of loan. Typically, a larger down payment decreases the total loan amount, which translates to lower EMIs throughout the repayment period.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
How magical was the day when you discovered your career path? After a lot of research, putting in so much hard work, late nights, your heart and soul, you have become what you are today.