Personal loans are the ideal solution if you suddenly need quick access to money to finance sudden expenses or achieve financial goals. However, high monthly EMI (Equated Monthly Installments) may give your wallet a headache. If you are struggling to manage your finances due to huge personal loan repayment values, we have compiled five smart suggestions to reduce your EMI burden without compromising your creditworthiness. Whether you wish to reduce your loan value or reduce personal loan interest rates, these suggestions will help you achieve your financial objectives efficiently.
1. Opt for a Longer Loan Tenure
Table of Contents
The simplest way to reduce your individual loan EMI is to increase the loan tenure. When you choose a longer tenure, your total quantum of repayment is spread over more months, thereby reducing each instalment. It is, however, important to mention that a longer duration may lead to an increased total interest payment in the long run. For instance, if you have a instant personal loan with a tenure of five years, you can request it be extended to seven years based on the policies of your lender. This reduces your EMI burden, but be sure to calculate how much extra interest you will be paying over the longer tenure of time.
2. Refinance Your Personal Loan
Refinancing your personal loan involves transferring your existing loan to a new lender who offers lower interest charges and better conditions. If you carry higher personal loan interest rates on the current loan than prevailing rates in the market, refinancing can reduce your EMI significantly. However, before availing the refinancing option, ensure that you look into the pros and cons of closing down your existing loan. Look for any prepayment fees or transfer fees that could offset the benefits of a lower interest rate. Shop around between different lenders also to find the best refinancing option that works for you.
3. Improve Your Credit Score
Personal loan interest rates normally tend to directly relate with your credit score. Best rate of interest is charged for the better borrower having the higher credit score. Maximizing the credit score can, therefore, be an option of reducing the loan EMI. An individual can improve his credit score by paying all loan dues on time, carrying a low credit utilization ratio, and not applying for multiple loans within a short time frame. Once the credit score improves, the individual can approach his lender for a negotiation of the interest rate or even for re-financing of the loan at a lower rate.
4. Pay Lump Sum Prepayments
Another effective way of settling lower personal loan EMI is through paying lump sum prepayments. If you receive a bonus or any other source of extra income, then the amount can be used for repayment of a large portion of your loan amount. It lowers the outstanding balance, and hence your EMI as well as future interest payment. But before you proceed with prepayments, ensure that you review your loan agreement for prepayment charges. There are also prepayment cost lenders who will charge you a fee for prepaying, which can prevent you from enjoying the advantages of lower EMIs. Compare the savings and the prepayment cost to determine if it is worth taking the plunge.
5. Negotiate the Loan Terms With Your Lender
There may be some negotiations between borrower’s party and the lender’s party. If at times you find yourself in a tight financial situation, sit down with your lender and seek some form of modification of the loan terms, such as extension of the tenure, rate, or other avenues for restructuring. Most lenders would actually consider such requests if the borrower has a good repayment track record since it lessens the chance of loan default. Offer sound reasons and evidence of your lower income or financial difficulties to support your claim. Assuming you demonstrate willingness to repay, your lender can deem it reasonable to lower the EMI to a level that is convenient to you.
Conclusion
Personal loan EMIs should not cause concern if you know how to use the correct techniques. Selecting a longer tenor, restructuring your loan, improving your credit score, prepaying in large amounts, and renegotiating with your lender are all possible means of lowering your monthly financial outgo. While each carries some advantages and disadvantages—that perhaps you must weigh on your fiscal goals to plan accordingly—Thenceforth, by taking the initiative, a person can make sure their EMI payments go down while repaying their loan on time. Finally, decreasing your EMIs will generate funds for other necessary spends, bringing more financial stability in your life. Be it taking a fresh personal loan or already servicing one, these suggestions can be the model for wiser money management. Find out what works best for you, and get in control of your money today!
Author
