choose a personal loan? Here’s how to lower EMI

In India, personal loans are frequently used to cover expenses through banks and other lending institutions such as NBFC. People can use them for a variety of purposes, including purchasing durable goods, medical emergencies, wedding expenses, home renovations, travel, vacations, and debt consolidation.

Loan amounts for personal loans are typically based on the applicant’s income, credit score, and ability to repay. Interest rates vary from lender to lender and depend on factors such as loan amount, loan term and credit score.

These loans often tend to have high EMI due to various factors. This article describes some simple tips to reduce the amount of EMI.

pay a significant amount as a down payment

When purchasing a new item, customers are often given the option to pay a small down payment and convert the remaining amount into EMI. A down payment is an amount that a consumer pays upfront to purchase a particular product. The client pays a portion of the total cost of the item, thus reducing the amount the client has to borrow as a loan. Interest on the loan is calculated based on the principal borrowed by the borrower.

Therefore, paying a substantial down payment is a wise choice. This not only reduces the loan’s EMI, but can also result in significant savings in the long run.

Longer Tenure Lowers EMI

The term of a personal loan is inversely related to the monthly payment. The longer the repayment period, the less EMI you have to pay. Note here that you may have to pay more interest on long-term loans. If you want to save interest, you should choose a short period with high EMI.

To make payments easier to manage, consider increasing the term of your personal loan EMI if a larger EMI doesn’t fit into your monthly budget. Before you apply for a loan, estimate your monthly expenses and schedule your EMI payments appropriately.

consolidate multiple loans

You may have had to borrow money from several different lenders to meet your financial needs in the past. Paying interest on a number of small loans can cost you a significant amount of money each month.

Additionally, tracking multiple individual EMI payments can be very difficult and risks incurring late penalties. All of these problems can be avoided by consolidating all existing debt into a personal loan. This simplifies EMI management and allows you to pay your debts faster.

Partial prepayment is a viable option

After making a certain number of EMI repayments (usually 12), most lenders offer the opportunity to partially prepay a substantial amount of the loan. It works by making large payments that are deducted from the outstanding principal balance. Less outstanding principal means less interest, resulting in lower EMI. By choosing a partial prepayment, you can get out of debt faster while shortening the loan term and reducing EMI.

Manage multiple loans smartly

There are loans with incredibly high interest rates, such as credit card loans. So if you have a combination of personal, mortgage, and credit card loans, it’s wise to pay off your credit card debt as soon as possible.

While paying off your credit card loan, you can donate a small amount to pay off your two remaining debts. By paying off the loans with the highest interest rates first, you can significantly reduce the high interest rates you’ll have to keep paying if the loan goes unpaid for a long period of time.

If you decide to take out a higher value personal loan, you can consider purchasing loan protection insurance. Loan protection insurance providers cover remaining EMI if you are unable to make your personal loan repayments due to premature death, incapacity, or unemployment. This will give your family peace of mind and protect them from future financial difficulties.