Life is full of uncertainties throwing surprises at you when you least expect them. Your savings might not always be enough to bail you out. On such occasions, we generally turn to Personal Loans to help us through these tough financial times.
Personal Loans are saviours during a money crunch. But it is important to choose the right Personal Loan in order to avoid trouble at the time of repayment. It is imperative to plan your debt repayment program before selecting the appropriate Personal Loan. Here are 4 golden rules of Personal Loan repayment that you should consider before choosing your Loan:
Choose EMIs you are comfortable with
First and foremost, choose EMIs that you can afford to pay every month. If you are already paying EMIs for previous debts, it is wise to choose a lower EMI to repay the Personal loan. Experts believe that EMIs shouldn’t constitute more than 40% of your total monthly income. The repayment of a Personal Loan through EMIs should not disrupt your normal lifestyle and expenditure.
Check This: Personal Loan EMI Calculator
Pay less interest
Choose the quickest way possible to repay your Personal Loan debt in order to avoid paying high interest. And the only way to repay the loan quickly is by opting for a lower number of high amount EMIs. It may sound contradictory to the previous point, but it is necessary to strike a balance between the EMIs and total interest payable. So, it is advisable to lessen the total interest amount payable by choosing the highest possible EMI that can be comfortably repaid every month.
Check This: Personal Loan Interest Rates
Avoid outstanding EMIs
Make sure that there is no delay in the payment of the EMIs as it not just affects your Credit Score but also leads to a fine in the form of late payment fees. When you feel that you might not be able to pay the EMI on time in any given month, explain your situation to the bank and request for an extension on the due date. And if you are struggling to pay the EMIs every month, you can either request the bank to increase the number of EMIs by decreasing the EMI amount or you can opt for a transfer of the Personal Loan debt from the existing loan to a new loan at a lower interest rate.
Prepay when you have money
When you have some extra money in hand, use it to prepay the Personal Loan debt. Prepayment of a Personal Loan not just relieves you of debt but also leads to less interest payable to the bank. Though it does feel great to clear off the debt in advance, a lot of banks impose penalty charges on the prepayment of Personal loans. Make sure you choose a bank which offers a Personal Loan with zero or minimal prepayment charges.
Additional Reading: Should you prepay your Personal Loans before other loans?
Now that you are aware of the golden rules of Personal Loan repayment, plan your debt repayment program in advance before you rush into a Personal Loan. We hope you will weigh all the factors mentioned above and opt for the best Personal Loan possible.