A Simple Guide to Better Managing your EMI Payments

The increase in the number of personal loan lenders in the country in the past few years has made availing of a personal loan easier today. Besides traditional banks, you can also avail of a personal loan from non-banking financial companies (NBFCs) and Fintech lenders. Thanks to the COVID-19 pandemic, digital payments' adoption saw a massive uptick amongst the salaried class. This propelled the growth of the Fintech industry in the country. A lot of private loan apps from the Fintech space came forward to help people facing financial emergencies. They provided access to digital loans quickly and conveniently, with a paperless and straightforward application process. But getting your personal loan approved is only half the battle won. Repaying your EMIs on time is more important, and failing to do so will have serious consequences. Here are four ways you can better manage them:

1. Prioritise Your Repayments

Your monthly EMI payments can form a significant part of your monthly budget depending upon the loan amount. You should always ensure that your account has sufficient funds for the payment. One way you can do this is by setting up your EMI date as close to the date of your salary credit as possible. Then, set up an auto-debit system with your lender so that you don't have to worry about making the payment yourself every month. You can incur high penalties if you miss even a single EMI payment. Why lose more money through charges? You could use that money towards your EMIs itself.

2. Pay a Little Extra Every Year

Depending on your monthly salary and your other financial obligations, this may not be easy for everybody. But if you find yourself having extra savings in any particular month, it would be best if you put that towards an extra EMI. Doing so would have positive implications in the long term, as your overall outstanding amount. Whether you have taken out a personal loan over five years, or a home loan over ten, it doesn't matter. You can breathe a little easier, as your loan obligation will be lesser by one EMI. Also, it's unlikely that your lender will complain if you pay a little extra every year.

3. Utilise Lump Sumps Towards Repayment

If you're fortunate enough to get a lump sum amount in the form of a large bonus of an unexpected windfall, it would be a sensible idea to use towards paying off your loan (in part). Depending on how much the amount is, you may be able to reduce the loan tenure significantly. This way, you will be free of the loan burden earlier than expected. Also, pro tip: if possible, make the lump sum payments in the first few years of the loan tenure. This will help you overall, as that's when the outstanding amount is the highest.

4. Opt for Shorter Loan Tenures Whenever Possible

When it comes to choosing your personal loan tenure, there's one factor that people often forget. The longer your loan tenure, the more you'll end up spending in interest payments, and vice-versa. If you opt for a higher monthly EMI over a shorter period, you won't pay as much interest, and you will also pay off your loan sooner! Of course, this is not possible for everyone, as it depends on how your monthly income and the financial obligations besides the loan. But it is always better to have a more significant monthly EMI instead of a longer loan tenure if you're looking to save money.

Wrap Up

The four points mentioned above are some practical tips to help you manage your loan EMIs better. If you're looking for a private loan app, KreditBee can help you out. Just download the KreditBee app from the Google Play Store, complete your profile, and leave it to us to process your application in as little as 10 minutes! To learn more, you can write to us at help@kreditbee.in.