With the increasing cost of living and the unpredictable nature of life, Personal Loans have become crucial saviours for many. Getting online finance no longer requires several branch visits or waiting for days. Digitalisation has made loans easily accessible without any collateral requirements, usage restrictions, and competitive interest rates. However, despite increased access to favourable loan plans, handling their repayment responsibly is important. A Personal Loan can help you navigate challenging situations only if you create a clear plan to repay it on time.
Repaying your loan on time will keep your finances in check and let you build creditworthiness. Continue reading to find some rules to make loan repayment a lot easier.
Create a Monthly Budget
Creating a monthly budget for your regular expenses gives you control over your finances. Apart from keeping a check on your expenditures, it also ensures you never get caught in a never-ending debt circle. Rather than handling hefty spreadsheets, use user-friendly mobile apps that allow tracking income and expenses easily.
The best way to create a budget is to divide your regular expenses into categories like food, fuel, groceries, entertainment, etc. Next, assign a suitable amount from your savings to each category. Refer to your previous months' account statement to decide on reasonable figures. Prioritise loan repayment over others and keep aside the EMI amount before proceeding with other expense categories. Apart from helping you repay the loan successfully, budgeting is also a great way to give you a financially independent lifestyle.
Auto-Debit Always Works
If you habitually forget your bill payments and often do not remember due dates, consider activating the e-mandate to auto-debit the EMI amount from your bank account. By doing that, you legally authorise the bank to automatically debit the due EMI from your account each month and credit it to the lenders.
After taking online finance, you can live your life free as your bank will automatically pay the EMIs from your account to the lender. By avoiding any lapses or defaults in the repayment, you can repay the loan responsibly and build a favourable credit score over time.
Prioritise Loans with the Highest Interest Rates
If you have multiple loans but limited finances, it is always advisable to prioritise their repayment according to their interest rates. As a general rule of thumb, you must first try to clear loans with the highest interest rates. Also known as the debt avalanche technique of loan repayment, this method can help you quickly reduce the total outstanding balance on your loans and become debt-free sooner.
Prioritise Loan with the Lowest Outstanding Balance
When facing a financial crisis, loan repayment pressure often bogs you down. If you are already short on finances, the abovementioned avalanche method will not work in your favour. Although it might save money, it takes time to show noticeable results. Instead, consider starting with repaying the smallest loans first. As you clear the loan with the lowest due amount, you may move on to the next debt on the list.
As you tick items off, you feel motivated to accept other challenges. Eventually, it will reduce the number of loans pending for repayment. However, do not forget other loans during the process, as paying their minimum balances is essential to avoid building a huge cloud of debt.
Make Extra Payments Whenever Possible
Are you expecting a big Diwali bonus, or is an increment due soon? Instead of splurging on a luxury gift or foreign vacation, consider putting that extra penny towards loan repayment. When struggling with your financial obligations, repaying the loans becomes a priority. You can pamper yourself later when the finances get back on track. The relief you get by paying a major chunk of your debt is far more than a short vacation. Even if it is a small amount, it might go a long way to let you emerge faster from your financial mess.
Consolidate Debt
Is your busy schedule making it challenging for you to keep track of multiple loans? Are cumulative interest rates on various loans increasing your overall liabilities? If yes, consider consolidating your debt with a new loan. In this method, you take a Personal Loan to pay off all your existing loans. Later, you can manage this single loan better while reducing the overall debt burden.
Before applying for online finance for debt consolidation, check your credit score to see if you can qualify for a better loan deal than your existing ones. Give attention to their prepayment charges as well, as the costs should not nullify the savings with debt consolidation. Furthermore, examine the loan term, as lengthier repayment tenure means smaller EMIs but liability for a longer period. When taking a debt consolidation loan, use an Personal Loan EMI Calculator to select a loan term with easily affordable EMIs.
Opt for a Balance Transfer
High-interest rate loans have bigger EMIs that are often challenging to manage. If you find another lender offering the same loan plan at a lower interest rate, consider transferring your current loan balance to the new lender to save money. However, consider prepayment charges, new interest rates, repayment terms, EMIs, additional expenses, etc., before making the final decision.
Keep Track of Your Loans
Periodically tracking your current loan details is essential. It helps you stay updated about your loan balance, upcoming EMIs, remaining loan tenure, interest components, etc. Stay in the loop to understand your Personal Loans meaning and automatically commit towards timely repayment.
Avoid More Credit
The whole exercise to repay your current debt will become futile if you take more loans again. Once your debts are clear, avoid using credit cards to avoid impulse purchases. Instead, switch to debit cards or cash to keep the expenses within the limit.
These are a few golden rules to repay your debt on time. Work them out to tweak your monthly budget and create a financial plan you can stick to for the next few years. Responsible borrowing and timely repayment can help clear the outstanding debt while improving your credit score. Eventually, you can obtain better online finance plans in the future with enhanced debt management skills.
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Contact Person: Hero FinCorp
Organization: Herofincorp
Email: info@herofincorp.com
Website:https://www.herofincorp.com/
Address: 09, Basant Lok, Vasant Vihar,New Delhi - 110057
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