We often opt for Personal loans to meet unplanned, unexpected and sudden expenses. These days with a variety of personal loan products one can plan trips, weddings, home renovations and purchase of expensive gadgets with the help of a personal loan. However, once you have availed a personal loan, the monthly EMI can be a huge added burden on your monthly finances, increasing stress and reducing the financial liquidity you have while taking major financial decisions. Here are some things to consider in order to reduce the personal loan EMI amount -
Choose a Personal loan with longer tenure:
Your Personal Loan monthly EMI outgo can come down significantly if you go for longer loan tenure. This helps you spread the loan over a long period of time which reduces the EMI amount after the breakdown of your loan amount.
It might put you to think that if you choose a longer loan tenure, you might end up paying more interest on the loan amount. However, the trick here is that once you have sufficient funds over and above your essential requirements, you can choose to foreclose your loan. Most banks and financial institutions let the borrower close their loan account after a few months or years of servicing the loan EMIs regularly. A longer loan tenure will not only help you reduce your EMI but will also give you the time to arrange funds and pre close the personal loan.
Choose a personal loan with Interest only payment option -
Fintechs and online lenders have innovated in the personal loan segment over the years. One such innovative personal loan is an EMI Free Loan. This form of debt gives you the facility to pay the interest every month and the principal in one shot every six months.
This effectively means you have a very low EMI per month, and every 6 months, you will have to pay off the principal, reducing your overall monthly burden.
Choose Personal Overdraft facility as an Alternative -
Imagine it like a wallet where you pay interest only on the amount you withdraw and that too calculated from when you withdraw on a pro-rata basis. And the best part – you can put it back in this wallet when you don’t need it and stop paying excess interest. Many borrowers prefer an overdraft facility to have a reduced monthly outflow towards their borrowing.
Choose the Loan Prepayment Option -
Prepayment or part payment option allows you to pay a lump sum amount towards your principal outstanding. After you have made the payment, the principal amount would be reduced. Thus, the interest is recalculated on the new principal amount. This way, you can reduce your monthly outgo from the next cycle itself by the part prepayment of the loan. The prepayment clause may differ from lender to lender. You must take the necessary awareness about their policy.
Choose Foreclosure of your Personal Loan -
If you have the provision of funds you can choose to foreclose your loan account by paying off the entire outstanding loan amount. Lenders have different policies for foreclosure.
Personal loans have become more affordable in recent times. You can choose a few simple steps to reduce the monthly EMI of your loan. You just need to watch out for all the policies and extra charges to avoid paying more towards your personal loan.
