Personal loans are like a sigh of relief in the times of need. After all it helps when you don’t have any money stacked in your savings, even when your friends or family are unable to help you. We are not left with any other option except than borrowing. Personal loan lends us money without any collateral and proves to be a blessing in a disguise. In case of mismanagement in handling of your loan, it can also become a nightmare for you. There is no way back from the debt trap unless you know how to handle it.
Debt management needs little financial knowledge, a strict discipline and the will to manage and overcome with the debts. If managed properly, personal loans help to ease financial hardship and free up the cash flow in short term. The benefits of personal loan include the flexibility to use the money the way you want, low interest rates and a fixed payment for the set period of time. The following advice can help you to handle your personal loan wisely. (Know the advantages of Personal Loan)
Understand your liabilities and financial situation. Clearly tell your financial institution about whom you owe and how much. Your personal discussion with loan officer the credit officer of the Bank/ NBFC should clarify that whatever you owe, you have clear intentions to repay it.
Borrow what you need
Do not borrow the money more than what you need. Always calculate the monthly EMI’s using Mudra Home EMI calculator which you can easily pay every month. If you already have other debts or any other type of loans, choosing a lower EMI to repay your new Personal loan make sense.
Choose right tenure
If you have comfortable hand in repayment then choosing a short tenure of repayment is a best option. EMI’s might turn out to bigger in size but this will in turn help you to pay less in total interest during the loan tenure and loan management becomes easier.
Do not skip on EMI’s
Late payments are not liked by anyone who lends the money and same is with the Banks/ NBFC’s or any other financial institution. The late or missed EMI’s not only negatively affect your credit rating and credit history but also leads to imposition of late fees payments. This also affects your ability for future borrowing. (Know about the factors effecting your loan EMI)
Make additional payment
Every time it’s not necessary that you are in a situation to pay an extra amount with every payment of your loan. By making one single or multiple additional payments can gain you with positive benefits. Any source of amount received from friends or family, a fat bonus or a huge amount of incentive can be used to prepay your loan amount. The extra amount which is not needed at that particular time will help to save lot of interest that you will otherwise be paying. Making additional payments will not only reduce the balance of your loan bus also result in lower interest cost and a shorter term.
To negotiate for an interest reduction Refinancing proves to be a great opportunity. This may also help to increase the frequency or the size of your repayments. To ensure that you have the maximum flexibility in your loan one should review the lump sum repayment options for your future needs. If you can afford to pay a lump sum amount now and refinance it then to have smaller amount moving forward. Whatever option you opt for but ensure that you are aware of the settlement amount of your loan before you start looking for new options.
Consolidation is also one of the options to merge your loans into one. Consolidate your numerous unsecured loans to one secured loan. It will help to balance one debt with a lower interest rate, payoff the debt earlier and for less money overall. This will keep you to stay motivated and track your progress. (Learn more about Debt Consolidation)
One can be benefited with a regular review of your financial position. Smart strategies can be selected to make the most of your money and reduce the tenure of the loan. Not all loans are flexible enough to adjust with many changes. Few loans have early repayment charges so it’s important to ensure that you don’t nullify your savings by making additional payments. The implementation of above simple yet effective advice can help you to manage your personal loan.