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When life throws big expenses your way, and your savings prove insufficient, personal loans are an accessible solution. They bridge the financial gap to help meet your needs as they occur, instead of waiting. This is especially helpful during emergencies.
But once you borrow, you become financially liable. Managing your loan smartly helps you fulfil this obligation efficiently with less stress. Refer to this guide to learn about effective loan management.
Tips to borrow smart based on your affordability
Evaluate your financial situation and make the right borrowing decisions to avail a personal loan you can manage comfortably. Before you apply, follow these practical steps to borrow within your comfort zone:
- Define your borrowing needs
Borrow for a clear purpose and calculate the exact amount you need. Taking extra care to maintain a buffer for additional costs may seem practical. But it increases your EMI and overall repayment burden.
- Compare total loan cost
A lower interest rate is appealing, but the total borrowing cost includes processing fees, stamp duty, EMI bounce charges, and more. Check these components along with the interest rate while evaluating lenders.
- Boost your loan application
You can qualify for better loan terms with a strong loan application. Work on improving your eligibility by improving your credit score, lowering existing debt, and maintaining a stable income.
- Calculate EMI before applying
Use a personal loan EMI calculator to get a realistic idea of your monthly repayment. It gives you a quick estimate based on your loan amount, tenure, and interest rate. It’s a prudent step to decide on a loan that fits your budget.
- Choose the right tenure
Lenders like IDFC FIRST Bank provide a flexible tenure ranging between 9 and 60 months on its FIRSTmoney smart personal loan. Stretch the tenure against this wide range only after understanding its effect on the interest outgo.
Repayment habits for stress-free personal loan management
Once you’ve obtained a personal loan, practice these habits to manage the loan efficiently:
- Make EMI a fixed priority
Treat personal loan EMI as a non-negotiable monthly expense, like rent or utility bills. This way, you can seamlessly accommodate it into your budget and plan the rest of your spending better.
- Track repayment progress
Keep an eye on your outstanding balance and stay ahead of the due date to avoid overdue penalties. You can get the needed insight on the lender’s portal or app with a detailed loan statement.
- Set up EMI mandates
Given the multiple financial responsibilities we all deal with, losing track of expenses is common. But missing out on EMIs attracts charges and affects your credit score. Automating EMI payments works better for the timely clearance of dues.
- Use extra income for prepayment (foreclosure)
If you receive a bonus, incentive, or surplus income, you can prepay your loan to close it early and reduce overall interest cost. Foreclosure is easy and can be done directly via the Bank app for the FIRSTmoney smart personal loan. Further, there are no foreclosure charges.
- Avoid adding a new debt
Taking on another loan while already managing one can put pressure on your monthly budget. Hence, it’s better to clear your existing debt before signing up for new financial commitments. If additional borrowing is unavoidable, consider the affordability of the new loan with a personal loan EMI calculator to make an informed choice.
- Consider a balance transfer if needed
If your current loan feels expensive, you can look for cost-effective offers and restructure your loan with a balance transfer option. It involves moving your outstanding loan to a new lender.
Final words
Stress-free repayment often comes down to small, impactful decisions. Maintaining financial discipline through the loan tenure helps you stay organised. Start by selecting the right personal loan to match your needs.
Once availed, you can manage repayments efficiently with financial planning and adjustments based on your changing situation.
