A personal loan can be taken for a number of reasons, such as starting a new business, refurbishing a house, planning a grand wedding, paying off credit card debts, etc. Applying for this loan is an easy process. As long as you fulfil all the eligibility criteria and have a good credit score to back your loan request, you can easily avail a personal loan from leading banks or non-banking financial companies (NBFCs).
However, repaying a personal loan is another matter. The process might not be as easy as availing a loan facility.
Ideally, the first thought that one must have before applying for a loan is to plan a budget to repay it back. However, in the case of an urgent financial need or a lack of knowledge regarding proper financial planning, many people overlook this aspect and end up repaying the loan at higher interest rates. Often, this causes a severe strain on their monthly budget. Therefore, the importance of smart management of your loan instalment could not be emphasized more.
Below mentioned are 5 tips for paying back a personal instalment loan:
1.Increase the frequency of your payment:
If your financial conditions permits, you can submit a request to your lender to allow you to increase the frequency of your loan instalments. For instance, if you have to pay your instalment, once every month, you can change its frequency to twice a month. Increasing the frequency of instalment repayment could significantly cut down the overall tenure of your loan repayment and help repay your loan faster.
2.Decrease your EMI amount:
In cases where you cannot afford to repay the personal instalment loan amount in full, you can request your lender to decrease your decided EMI amount. However, one must note that in doing so, the total tenure of loan repayment could increase significantly.
3.Find different means for generating additional income
An additional source of income can always come in handy in quick repayment of your loan. You can use the extra cash to repay the instalment amount earlier than the decided tenure. Doing so could significantly reduce any financial strain on your monthly budget, thus allowing you to comfortably repay your instalments.
In case you come across a significantly large amount through any business profit or sale of a personal asset, you can use the same to prepay your entire balance loan amount well in advance of the decided tenure. Loan prepayment option can be used in two ways:
- To prepay the entire balance of the outstanding loan
- To prepay for an upcoming loan instalment
Prepayment of a loan significantly helps in saving on the interest rates on your EMIs.
Part payment of the loan is another useful repayment option that works on similar lines of loan prepayment. Part-payment of loan involves you repaying a significant sum of your loan that might not entirely amount to the outstanding principal balance. Part-payment of the loan goes a long way to minimize your interest amount. Another benefit of part-payment is that it can be done more than once for your loan repayment.
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