As the daily expenses get higher day by day, it isn’t easy to accumulate adequate funds for the future. Every day, prices of basic necessities soar up, forcing the individuals to spend more money. Also, there are some major events in our life that require funds so that we can lead a comfortable life in the future. To finance some of the big projects in life, it is recommended to go for a personal loan rather than purchasing it with savings done for the future. A loan becomes a viable option in fulfilling life’s vision or meeting any instant needs. Well, one must remember that taking a loan means adding an expense, which incorporates the interest rates that banks impose on the payable EMI. A higher rate of interest means the loan amount increases considerably making the EMI payments higher automatically. You can also calculate the amount of EMI on a Personal Loan EMI calculator. Here are some of the ways by which one can reduce the cost of the loan EMI.
Here’s how to lower your personal loan EMI
Prefer a high downpayment: Before taking a personal loan, a borrower can opt for a high downpayment to reduce the loan EMI repayment. Downpayment signifies the amount that a customer pays upfront while purchasing a respective commodity. Since a large part of the total amount is already paid the customer, it means that the amount borrowed will automatically get reduced. The higher the loan amount, the higher will be the interest rate which adds up to the total EMI cost. Therefore, it is sensible if a customer pays a larger amount as a downpayment.
Go for a step-down EMI plan: Some various banks and NBFCs offer their customers with a step-down EMI plan to reduce the higher burden of the loan amount. By opting for this scheme in a personal loan, a borrower requires to pay a substantial amount as EMI during the beginning of the tenure. You can easily use the personal loan EMI calculator online to calculate the EMI payable on the loan. As time passes, the EMI amount gradually decreases with the decrease of the principal amount after each monthly payment. This plan also reduces the interest rate in the latter part of the loan tenure. This type of Flexi-tenure is more suitable for people who are nearing their retirement age.
Select a loan with longer repayment tenure: Whenever anyone selects a personal loan for a longer duration, it distributes the loan amount over the wider time horizon. It requires to pay lesser amounts in the monthly installments. However, a longer duration of loan needs interest to be paid on the outstanding debt over an elongated period. Though, the EMI will decrease the borrower will end up paying more interest rate over the course of the loan. Therefore, one needs to weigh all the pros and cons before opting for such an alternative. You can check the EMI rates using the personal loan EMI calculator online and then easily decide.
Reduce Loan Burden with full or part prepayment: Through a prepayment of the loan amount, you can go a long way in reducing the EMI payment. In case you have received a hike in your salary or get an additional source of income it is suggested to go for loan prepayment. Since we all know that higher outstanding loans will attract a higher interest rate. While a full prepayment will reduce the burden completely, a part prepayment will drive down the principal amount and also the term of the loan leading to a lower payment of interest. You can use the personal loan EMI calculator to calculate the EMI payable on the loan.
Consider taking a personal loan with your existing bank: If you have an existing relationship with a specific bank, then it wise to take a personal loan from them as this could work in favor of procuring a personal loan with an affordable interest rate. You can even check the EMI payable, in a personal loan EMI calculator to have a better idea. This will have a significant impact on the EMI payment with lower interest rates.
Negotiate for better interest rate from banks: An individual can even negotiate with the lending institutions for a better interest rate on a personal loan. Often banks and NBFCs do that to develop brand loyalty and attract a good customer base in their area.
Compare the different lenders: Sometimes, your existing bank might not offer you the best deal on a personal loan, so feel free to around elsewhere. There is no dearth of credible loan providers in the markets; though, you need to do proper research on the loan processing fee, prepayment penalty (if any), and other such charges as these can increase the overall cost of the loan as well as EMI. Further, if you opt for switching your personal loan, take note of additional transfer charges imposed by the current lender. This also contributes to your EMI payment.
The aspects as mentioned above in context to a personal loan can help to downsize the EMI payment to a considerable extent. Although one must assess their financial conditions and needs before deciding upon any particular option.