A personal loan proves to be useful when you need funds and your savings fall short of your needs. The personal loan eligibility parameters are simple, and the documentation is also less. Moreover, you can apply for the loan online and get the funds credited to your account at the earliest. The personal loan interest rates are affordable, and the repayment is flexible so that you can pay the loan at your convenience.
That said, if you default on your repayments, you will attract considerable interest expenses, and it will hamper your credit score. So, defaulting on the loan is not advisable. But you make the loan more affordable with the following tips:
Tip #1 – Opt for an affordable amount of loan
First and foremost, ensure that the loan amount is affordable. Just because a personal loan can allow a high quantum of loans, the amount that you borrow should depend on your need. If the loan amount is affordable, you would be able to repay it easily, and the loan burden would be in check.
Tip #2 – Calculate the EMIs beforehand
Thanks to online personal loan EMI calculators, you can calculate the expected EMI before you actually apply for the loan. The EMI depends on the loan amount, interest rate, and repayment tenure. You can change the combination of the loan amount and repayment tenure in the personal loan EMI calculator to find an EMI that best suits your pockets.
Tip #3 – Opt for prepayment of the loan
Personal loans allow partial prepayments during the loan tenure, wherein you can make a lump sum payment towards your outstanding loan amount. This lump sum payment reduces your outstanding debt, which, in turn, can reduce your repayment tenure and/or the EMI. So, if you get a lump sum income anytime during the loan tenure, opt for prepayment to ease off your loan repayments.
Tip #4 – Step up your EMIs
Over the loan repayment tenure, your income might increase. If it happens, you should increase the loan EMI too. Higher EMI payments would help you pay off the loan quickly so that you can get debt-free in a few years.
Tip #5 – Foreclose the loan
Foreclosing a loan means paying off the outstanding balance of the loan before the stipulated time. This closes the loan account and makes you debt-free. If you get a lump sum income from a source and want to close your loan account, you can opt for foreclosure and pay off the loan in full.
Tip #6 – Choose a longer repayment tenure
Personal loans usually allow repayment tenures going up to 60 months. A higher tenure means a lower EMI and vice-versa. So, to make the EMI affordable on your budget, choose a longer repayment tenure. The resultant EMIs would be lower and easier to repay.
Tip #7 – Use your negotiating skills
Personal loan interest rates can be negotiated with the lender. Yes, you read it right! You can negotiate the interest rate by leveraging a high income and a good credit score. You can also add a co-applicant and increase your personal loan eligibility. A high income, credit score, or eligibility is favorable for lenders and can persuade them to reduce the personal loan interest rates. So, put your negotiation skills to the test and negotiate lower interest rates to reduce the EMIs.
Which tip did you find the most useful?
You can choose one or more of these tips to reduce your loan burden. So, avail of a personal loan and fulfill your financial commitments while at the same time ensuring that your pocket doesn’t bear the brunt of the loan burden.