We have a range of financial needs. It may be a medical emergency for one person, and it might even be educational expenses for another. It might just be a one-time purchase, such as a new gadget or a trip. When you have sufficient funds in the bank, you cannot put off all expenses at once. Some costs may be necessary right now. This financial gap is filled by a personal loan.
Because a personal loan is an unsecured loan that may be used for any reason, it’s the best loan for meeting a variety of needs that don’t fit neatly into any one category.
Credit cards are more expensive than personal loans. When you have a scheduled cost, it’s better to apply for a personal loan rather than using your credit card unless you expect to pay it off within the period.
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Though a personal loan might help you meet short-term financial demands, you must remember that it must be repaid every month in equal installments without delay or default. It’s a duty, and you’ll have to stick to it if you want to keep your credit score.
When considering a personal loan, the first step is to utilize a personal loan EMI calculator to determine the maximum loan amount you can afford and the appropriate repayment period. There’s no use in borrowing money than you need since you’ll have to pay more money each month to service the loan.
So, if you satisfy the above criteria, getting a personal loan is not difficult. The repayment of the debt necessitates a great deal of responsibility and self-control. It should go without saying that the loan must be paid back on time. You cannot afford a single default because it will affect your credit score and future borrowing ability. A strong CIBIL score, preferably over 750, is a crucial requirement for improving your chances of acceptance and getting better terms on your loan.
How do you ensure that you pay your EMIs on time? Let us explore a few tips that will help you in this regard.
Use the Personal EMI calculator to estimate your repayment capacity
It is hard to underestimate the importance of a personal loan EMI calculator. While the loan amount is typically established by anticipated expenses or requirements, and the interest rate is set by the lender, the one element over which you have complete control is the loan’s term. The monthly EMI can be changed by changing the loan’s tenure. If you have a low income and costs to pay, a longer-term is preferable. This will lower your monthly expenses without taking a toll on your budget or compromising your lifestyle.
Do not pay more than 50% of your monthly income towards EMI
It’s critical to keep in mind that your monthly EMIs should never exceed 50% of your monthly income. You must draw a line in the sand and ensure that this barrier is never crossed. This will guarantee that you have enough money to cover your daily costs. It’s critical to figure this out ahead of time, or you’ll end up borrowing from X to pay Y, which isn’t a good scenario.
Do not treat credit card as an extension of your payslip
Although a credit card is not an extension of your payslip, most people are unaware of the dangers of falling into a credit trap. For most people, the allure of quick money and the availability of enticing marketing offers is too much to refuse. They end up finding affordable that they do not require. Being a shopaholic comes with its own set of drawbacks.
Having several credit cards poses an even greater risk since you may wind up using one to pay off the balance on another before you realize it, and you may find yourself overwhelmed by the many payments that will become due. Credit cards are only helpful if they are paid in full during the credit period. Otherwise, you may be liable to interest rates as high as 24-30%.
Keeping track of your spending and taking out an instant personal loan will help you get through a cash crunch when you need it.
Create a contingency fund
It is critical to saving aside a sum of money as soon as you begin working to provide for a rainy day or unplanned situations. As a general rule, you should never spend all of your money. Before deciding to splurge on yourself, you must first establish a contingency fund.
Consider a family mishap or medical emergency, or the abrupt loss of a job. You will require cash to keep you surviving while you look for a new career. The EMI payments, on the other hand, will continue. Every month, they will be due. As a result, it’s critical to put money aside every month when you can to help you get through the tough times.
Maintain a good credit score
The significance of having a strong credit score cannot be understated, as it allows you to keep your line of credit open in the event of an emergency. Defaulting on or postponing EMIs will reflect negatively on your credit record, reducing your chances of obtaining a loan in the future. As a result, it’s critical to handle your loans properly and pay them off regularly.
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Prepayment or foreclosure of the loan
You can choose the longest repayment period possible at the time of application based on your repayment ability. Your EMIs will be kept low as a result of this. After you’ve paid them for six months, you can prepay the remainder in full or in part without incurring any further charges. Even a partial prepayment can significantly reduce the EMI. Any future income inflow, such as a bonus or a raise in income, can be used to pay off the loan. This technique will guarantee that you manage the debt responsibly and without too much worry.
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Do a complete study of the market before selecting a lender
Schemes are accessible throughout the year, but notably during festivals. If you’re thinking about getting a personal loan, it’s a good idea to shop around for several lenders and accept the best deal. This will allow you to benefit from the lower interest rates available. When making the most prudent financial decisions, it is critical to be well-informed and aware.
Set up a monthly reminder to fund the account from where the EMIs are paid
If you have an eNACH mandate, it is your responsibility to maintain the account adequately supplied until the EMI is due. Failure to do so will result in the instrument’s dishonor. This can result in penalties, and it is also prohibited. It is preferable to be cautious and keep the account funded until the due date. Because you may be busy with your daily life and the date may accidentally slip your mind, you may want to set a reminder on your phone to do this every month.
Managing your loan payback EMIs is a matter of self-discipline, and you should make it a habit. Failure to do so may result in serious problems that should be avoided. It’s simple in seeing how convenient it is to figure out the best EMI and pay it on time. This will go a long way toward keeping you stress-free, even if you have a debt to repay.