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Personal loans and credit cards have become an indispensable part of every individual’s financial journey. One of the major reasons for this is the easy availability and affordability due to technological advancement. However, regardless of the ease, the repayment structure for any form of credit is stringent and requires due diligence.Defaults in personal loan payment
can result in a drop of credit score and affect future credit possibilities. Therefore, it is crucial to smartly manage them and other debts.
6. Opt for a personal loan balance transfer or debt consolidation:
- Create a budget before you opt for a personal loan. Ensure you have enough funds to smoothly make your personal loan payment and not affect your normal expenditures. Taking on another debt without due research can overburden your finances and result in default of payments and hamper your credit score.Although this is part of point 1 while making your personal loan payment, keep a tab on your expenses every month. This will help in identifying expenses which are unnecessary and can be cut down, hence look out for them. For example, while you make a budget, look for expenses that have gone overboard and can be brought down.Although this must be done before applying for a personal loan, calculating the total debt to understand whether or not you will be able to make the personal loan payment smoothly is necessary. Moreover, this step will help in understanding how quickly you can repay the loan. A personal loan calculator can identify the monthly amount to be set aside for this.As mentioned above, a default in your personal loan payment can affect your credit score adversely and affect your future credit possibilities. Therefore, it is important to make timely payments. If you are someone who tends to forget dates, it is better if you set reminders or automate your payments.The best way to never miss any personal loan paymentis to keep loan repayment as a priority. Make a rule to make the payments in full every month until you repay the loan.If you are managing several credit card payments or small and big loans together, one of the ways to manage your personal loan payment is by opting for debt consolidation . This not only helps in saving thousands on interest cost but eases the process of repayment.
A personal loan is a financial tool that can aid you in emergencies. However, in no way should it make it overwhelming in managing your finances. This is why personal loan payment must be made with discipline and diligence. Any type of default can affect your creditworthiness adversely.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
FAQS - FREQUENTLY ASKED QUESTIONS
What is the best way to repay a Personal Loan ?
The best way to repay a Personal Loan is careful pre-planning. Prioritise your EMIs while creating a monthly budget, make timely payments to avoid penalties, and reduce the loan principal by making extra payments and saving on interest costs.
How do I calculate the monthly payment for my Personal Loan?
Monthly instalment is factored in the loan amount, tenure and interest rate. For easy EMI calculations, you can use online loan calculators provided by the lender.
How can I lower my monthly payment on my Personal Loan?
There are several ways to lower your Personal Loan EMI. They include refinancing your loan for a lower interest rate, extending the Repayment tenure, maintaining a high credit score to negotiate with the lender to lower your interest rate or adjusting the loan terms. You can also make additional payments to reduce the number of EMIs.
Is it a good idea to repay Personal Loans early?
Paying off your Personal Loan as soon as possible can be a good idea because it will decrease your interest expense. You will not only be able to save on borrowing but also improve your credit score, which indicates responsible financial behaviour.
Will my CIBIL score be affected if I pay off a Personal Loan before the Repayment tenure ends?
Paying off a debt early impacts your credit score positively. It shows your responsible financial behaviour. Additionally, it reduces your debt-to-income ratio.
How can I track my Personal Loan Repayment progress?
Keep track of the payments made towards your Personal Loan Repayment by monitoring your remaining balance. Many lenders allow you to access your loan account, where you can track your loan status - application status, verification, payment history and outstanding balance.
What can be the consequences of late payments for my Personal Loan EMIs?
Late Personal Loan EMIs can harm your CIBIL score. With a low score, it will be challenging to secure credit in the future. The lender can even take legal action to recover the outstanding balance.
