What can reduce your personal loan burden? When savings get scanty with increasing monthly expenses, a personal loan can be a wise step to maintain a comfortable lifestyle. But wouldn’t it be nice to reduce the EMI burden and be done with the loan sooner? Picking up loans become an important part of your life as you begin to identify a lifestyle that suits you the best, the kind of investments you must make and goals you want to realize over a period. An unruly economic condition often comes in the way of maintaining a stable financial balance, like inflation pumping up daily expenses. In addition to these, we set aside chunks to invest for long term goals which can range between 5-15 years in duration and face low too high in risk exposure. In such a situation, it gets difficult to keep up with the usual expenses. This is where debt steps in! It’s a friendly partner that can set up everything it takes to keep you happy but at the cost of returning it back with interest. Related Reads: Will settling a debt affect my credit score? Amidst maintaining a lifestyle, paying off debt and planning for bigger goals in the future, you must plan to reduce the burden of repaying the loan EMIs! Here are 6 ways to reduce loan EMI burden 1) Clear your credit: There are two approaches you can take to clear your debts. You can either stack them up according to decreasing interest rates, or according to increasing amounts due. So you can either decide to pay off the loans that have higher interest rates or you can choose to pay off the smaller loans first & keep the biggest loan for the last. In addition, ensure that you repay your credit card dues & loan EMIs on time to maintain your credit score for personal loan; this will help you avail lower interest rates. 2) Contact current lenders: There are cases where the lenders can relax you from any change in the interest rates due to repo rate cuts & hikes. Make sure you maintain a relationship with your lending bank and are aware of the policies which can be implemented in your favor. Some banks which perform a credit check also relax interest rates if your credit history is long enough to qualify as a trustworthy borrower. 3) Extend loan tenure: You can spread the same amount across a longer period which means that you will have to pay a lower loan EMI. This will help you clear more loans faster & then move on to the long-term debts. If you reduce your EMI and attempt to pay more every now & then, you can adjust the interest charged on outstanding debt. 4) Control your expenses: Now that you have enough debt to take care of, avoid taking on any new debt. Spend only as much as you absolutely need to; no more, no less! Keep up with this approach till you clear most of your loan EMI & credit card dues. Once you clear a few loans and have some amount to spare out of your income, make sure that you begin investing that amount in a mix of financial instruments. This will balance your returns & risk exposure along with bringing you good returns.
5) Increase EMI amount: If you have a surplus chunk kept on the side, use it to clear off your loans first. Another way to prepay loans is to leverage your increasing income & increasing your EMI accordingly. This will reduce the interest rate you would’ve paid for a longer tenure & increases your chances to boost your credit score. 6) Review credit periodically: Always be aware of the terms & conditions that is in place with every loan you pick. Keep monitoring your loan EMI deductions and any changes in the policies. It is also advised that you monitor any other change in interest rates to prepare your finances in advance. Check your credit score & credit report to know your credit limit. This will help you maintain your credit utilization ratio within 30%. One must opt for ways to maintain their lifestyles & achieve their goals but keeping in mind their financial commitments & affordability. Don’t take up any debt that will hamper your other expenses. Lastly, always maintain a surplus or a backup plan to support your needs. If you are planning to evaluate your accounts & status, start by checking your CRIF credit score!