You must know about the different types of loans available in the market. For example, there are car loans for purchasing a new car, home loans for buying a new home, and business loans to establish and expand your business. But there can be times when you may require urgent finances, and none of these loans can help. For instance, you may need money for purposes such as tackling a medical emergency, wedding expenses, home renovation, making big-ticket purchases, or planning a vacation with your loved ones. There are no specific loans available for these purposes.
This is where a personal loan can come to your rescue. You can avail of a personal loan with a lender of your choice and efficiently meet all your financial requirements. And since personal loans are multi-purpose loans, there are no restrictions on their end-use. From tackling a medical emergency to paying for higher education to planning a dream wedding, you can do everything with the help of a personal loan and repay it in easy Equated Monthly Instalments (EMIs).
However, you need to remember that your personal loan EMIs can become an added monthly expense. And if you do not work out your finances carefully, they can impact your budget and feel like a burden. In this article, we will tell you about ways to help you reduce your personal loan EMIs. Let’s get started.
Things have changed drastically over the last few years and getting a personal loan is no longer difficult. You can simply approach a bank or a non-banking financial corporation (NBFC) to apply for a personal loan. You can also download personal loan apps on your smartphone and get instant personal loans without any documentation. These facilities can tempt you to avail of a personal loan even if you don’t have an immediate requirement of finances. However, this cannot be termed a good idea at all as it will unnecessarily add a burden to your monthly budget. You should borrow a personal loan only when you need urgent finances and not for fun. Also, you should make sure that you’re choosing your personal loan amount as per your requirement. You should neither choose less nor more than what is required. This way, you can save yourself from paying unnecessary high EMIs.
Your loan tenure is one of the significant factors that impact your personal loan EMIs. It is the total duration for which you have taken a loan, and you’re required to repay the entire loan amount along with interest during this period only. 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’s 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 also means paying a higher interest amount than what you would have paid for a shorter tenure. Hence, it’s 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.
There are two types of interest rates levied by lenders on personal loans – fixed interest rate and floating interest rate. In the case of a fixed interest rate, the personal loan interest rateremains the same throughout its tenure. On the other hand, if you opt 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. By opting for a personal loan with a fixed interest rate, you will know the exact EMI amount you need to pay every month throughout the loan tenure. However, in the case of the floating rate of interest, your EMIs can change based on any change in your personal loan interest rate. 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.
Making part prepayments of your personal loan will reduce the principal amount, and thereby your EMIs will automatically decrease. So, try to make part-prepayments of your personal loan whenever possible. You will sometimes have surplus cash in your hand after receiving a bonus from your employer, interest from your investments, etc. You can use this money 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 one to three per cent of the outstanding loan balance. It’s prudent to confirm the prepayment charges with your lender before applying for a personal loan with it.
In addition to the interest amount, several lenders levy some hidden charges on their personal loans. These include processing fees, late EMI penalties, cheque bounce charges, etc. These charges may snowball together and can swell up your personal loan EMIs. That is why it’s very crucial to read the fine print carefully before applying for a personal loan. This will help you in understanding all hidden charges levied on your loan and you can make an informed decision. You can also ensure that you do not goof up on the repayment of your personal loan so that you don’t have to incur these hidden charges and your EMIs stay as little as possible.
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’s best for you. 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 while selecting your personal loan lender. Apart from the interest rates, you should look at other factors, such as loan tenure, repayment flexibility, customer support, etc.
Be diligent and wise while applying for a personal loan with a lender. With little research and some smart financial habits, you can get the best personal loan deal and keep your EMIs in check. Make sure that you choose the right lender and pay all your EMIs in time. Otherwise, your credit score can take a hit, and may hamper your chances of getting a loan again in the future.
With Poonawalla Fincorp, you can avail of a personal loan at the most competitive interest rate. If you’re our existing customer, you can also get pre-approved offers on personal loans and further reduce your EMIs.
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