Tips to Repay Your Personal Loan On Time
While taking a personal loan is a normal activity these days, one must never lose sight of the fact that every personal loan you take needs to be repaid on time. Typically, when you take a loan, there is a pre-agreed schedule of fixed monthly instalments over the loan period. By paying the EMIs (equal monthly installment) on time, you can improve your credit score and also avoid paying late payment penalties and heftier interest.
Finding the best personal loan rates can be a quest of sorts, but we are here to help you with that. If you want the lowest interest rate personal loan, here are some of the best practices that will help you stay ahead of your repayment schedule and keep the cash outflow in check:
Prepare a budget:
Taking a personal loan might not be a big challenge for you, but at times mismanagement of loans can be harmful. Therefore, you must prepare a realistic budget to meet your spending habits and financial condition.
By smartly planning, you will never be short of the money to pay your personal loan EMIs on time. Further, you will also not be compelled to spend the money kept for personal loan EMI on other things.
Before preparing the budget, you must deeply understand the working of your loan and savings. By keeping a track of your daily expenditure, you can easily segregate between actual needs and optional expenditure. This will give you control over things that you shouldn’t be spending on.
By dividing necessary and avoidable expenses into different categories, it becomes much simpler to spend the money only on things that are essential. If budgeting proves to be difficult then you can also choose any of the easily available smartphone apps which help in efficiently planning budgets.
Restructure your current loans:
Often people tend to opt for longer loan terms that allow smaller EMI amounts, believing that it is easier to pay the smaller EMIs. However, a deeper analysis reveals that the longer-term EMIs also means that you have to pay a higher interest amount in total and might not have the best personal loan rates.
On the other hand, if you take a personal loan for the shorter duration, the EMI amount would be higher, but, the overall interest paid will be lower. Therefore, you must restructure your existing loans and ensure that the tenure of your personal loan is as low as you can manage. Remember that the lowest interest rates might not always be the best personal loan rates for you.
Identification and prioritization of repayment loans:
Once you have clear control over your expenditures and a budget in place, the next step should be to give priority to personal loan repayments.
Identify your costliest loans, rate of interest, and the date of repayment. By doing so, you won’t be able to miss the loan repayment dates and also know how much you need to pay on which date.
The focus has to be on allocating the funds primarily towards repayment of loans with the higher interest rates and keep the loans with lower interest rate going with timely payments. This will help you in reducing the amount of interest paid on your personal loan and get rid of the more expensive loans first.
When you keep multiple loans running, it also leads to higher interest payments. Therefore, you must consider loan consolidation from a bank or a licensed moneylender. This will help you streamline your repayment terms and you will also get the best personal loan rates. You can further consolidate these loans into secured loans. A secured loan offers longer repayment tenure and is the lowest interest rate personal loan.
The cost of living is getting higher in recent years. Therefore, it is a better option to pay off the personal loan by making lifestyle changes and cutting out unnecessary spending.
By not spending money on avoidable things, you can save more, pay your personal loan EMIs with ease and also use that money for other important things. Making lifestyle and habit changes is not easy, but dedicated efforts and focusing on the benefits will make you used to it.
By focusing on timely and early repayment of your personal loan, you would improve your credit rating, and banks as well as licensed moneylenders will gladly offer you the best personal loan rates in the future!