Tense About Loan Repayment? Follow Our Lead
It seems like a simple enough plan: take a personal loan and repay it in a few months from your salary. However, it’s not as easy as it first appears when the EMI schedule begins. You feel overwhelmed with the responsibility of repayment, but you needn’t worry. We present a guide for you to close your loan earlier without extraordinary effort:
Make a plan.
Nothing positive is ever achieved without a plan, and this adage applies to your loan repayment as well. Start with a plan that lists how you will expedite EMI payments or foreclose the loan without overburdening your finances. List out your monthly expenditure, for starters. After this, list the EMI amount – this is a mandatory expenditure that cannot be waived off for a month or two. List all other mandatory expense heads such as utility bill payments, grocery shopping, domestic staff salaries, etc. Add all your expenses and make sure they do not exceed 70% of your take-home income. If they do, it means you need to trim the fat in some areas of expense to save your income.
Set money aside for prepayment .
Prepayment of the instant loan can happen only with a reorganisation of your take-home income. If you have not been saving money from your monthly income, start doing so now. Start a separate savings fund that you use to repay the loan in periodic lump sum amounts. For example, if you have a loan outstanding of Rs 1,00,000, aim to save Rs 5,000 from your monthly income every month. After five months, you will have Rs 25,000 set aside; this money can constitute one pre-payment. Once paid, you will have reduced the principal borrowing dramatically. Follow this model every month for regular pre-payments.
Set reminders for repayment.
On the off chance that you miss the EMI payment date, the loan app will send out an alert asking you to make the payment soon. If it doesn’t, you can take the help of your phone’s calendar to set the reminder. Do remember that leading online loan apps offer a grace period of 7 days if you miss the EMI due date, but after this period elapses, the app will charge additional interest on the next EMI.
Restructure the loan periodically.
Once you’ve made regular pre-payments that have resulted in the principal amount reducing by at least one-third, you can ask the loan app to restructure your loan. Restructuring is an important step that saves you money: first, the app recalculates your EMI based on the balance principal. Thus, the EMI amount reduces. Second, you repay less money to the app by way of interest once restructuring happens. Compare how much interest you would pay if you were to leave the loan as is.
Foreclose if the pending principal is a small number.
Suppose you are left with four or five EMIs before the instant loan is fully repaid. Check your finances to see if you can close the loan now rather than pay more EMIs to close it a few months later. Doing so gets you out of debt sooner rather than later. Also, leading online loan apps do not charge foreclosure fees.
Conclusion
While a quick loan can help you meet a financial emergency, it is still a form of debt that you must repay responsibly and as soon as possible.
