Monday, May 23, 2022

Four Ways To Manage Your Personal Loan  

Taking a personal loan is easy but default or delay in paying the EMI can cost you dear. Here’s how you can manage your personal loan.

Four Ways To Manage Your Personal Loan  
personal loan

Personal loans can help you wade through tough times. It’s easy to get personal loans too, these days. However, with this comes the responsibility of paying the EMIs and that too well on time. Here are some tips to help you navigate through the entire EMI payment process.  

Assess Your Repayment Ability 

Take a look at your income, savings and future prospects carefully before taking a personal loan. Calculate your EMIs after taking into account all your personal expenses. There are many online personal loan calculators available, which you can use.  

It is important to restrict the personal loan amount as these loans come with high interest rate. “Personal loans also have shorter repayment period and hence the EMI on personal loans may take a reasonable share of your monthly income as well,” says Harshad Chetanwala, co-founder,, an online investment and research platform for mutual funds. Also check the repayment and part-payment related clauses to ensure that you have some flexibility in repaying or closing the loan, he adds. Take the loan only if you can service it regularly.  

Manage The EMI 

Your total EMI outgo should not be more than 35-40 per cent of your monthly income. You may have other loans, apart from the personal loan, therefore you may need to manage your expenses in such a way that the personal loan EMI is paid in time. This is also because personal loans are unsecured loans and therefore among the most expensive credit products. “Try to control your monthly expenses and ensure sufficient surplus as you would not want to impact the loan repayment. The cost of delay in EMI payment for personal loans is quite high and you should avoid it,” says Chetanwala. If possible, try to prepay some part of the loan so that the EMI amount gets reduced. 

Loan Tenor 

A longer tenor means a lower EMI but a shorter tenor means the loan is paid off sooner. Check if there is a possibility to change the tenor. This flexibility will help you prepay if you have more funds available or pay a smaller EMI over a longer period if needed. When you take a personal loan, choose the tenor over which you can comfortably pay the EMIs. However, do remember that a longer tenor means you pay more as interest.  

Do Not Miss An EMI 

Default or late payments affect your credit score, which will have an impact on the loans that you apply for in the future. If you are forgetful and think that you will forget to pay on time, just set a reminder. This is especially helpful if you pay by cheque. Do remember to deposit the cheque on a particular date every month.  

A personal loan is an easy-to-access credit product but is also among the most expensive. Take a personal loan only if you have to and after taking account of your income and expenses. Once you have taken the loan, service it regularly.