If you pay your personal loan in any kind of irregular manner, you run two different risks. The lender will first apply any applicable penalties; second of all, your credit score will suffer from your late payment on your EMIs. Consistent failure to pay EMIs also generates the worst-case scenario of 5 lakh loan default.
Knowing the several possibilities is quite important since it is not unusual for a good number of people to routinely experience similar problems regarding the repayment of their personal loan EMIs. This keeps loan default away. Among the best strategies to keep out of default on your personal loan, manage your monthly payments (EMIs), and protect your financial future are these ones:
Redeem fixed income investments not meant to meet specific financial goals.
Identification of fixed-income investments in recurring deposits, debt funds, or fixed deposits not allocated for any major financial goal is one of the first and most important steps borrowers of personal loans should take when they are having trouble paying back their EMIs. Generally speaking, considering long-term returns, the returns generated by fixed-income investments are less than those generated by other asset classes—especially equity investments. Moreover, the interest acquired from such investments usually is far less than the interest rate charged on personal loans and even the loan options offered by lenders at the lowest feasible cost. Redeeming your low-yielding fixed-income investments can therefore be a lifesaver for you in cases when you are having difficulty paying back your personal loan EMIs, so helping you to prevent 5 lakh loan defaulting.
Ask your current personal loan lender to extend the terms of the repayments.
Things like a drop in monthly income or an increase in the monthly installment (EMI) of an existing loan upon the arrival of the loan reset date—which is brought on by an increase in lending rates—often put strain on a borrower’s finances. This throws off the current EMIs’ return. Under these kind of conditions, the borrower can ask the lender, even if seems as the best bank for personal loan, to extend the loan period. This is so since a smaller personal loan EMI results from a longer loan term. This could help the borrower to pay back the reduced EMI, so possibly avoiding loan default. Those who have extra money could try to prepay the loan whenever it would help to reduce the overall interest cost. This is so true even if extending the loan term will result in higher interest paid by the borrower.
Should you have to pay the EMI, you should draw on your emergency fund.
Dealing with events that call for fast financial assistance depends on the establishment and maintenance of a sufficient emergency fund equal at least six times your monthly recurring and obligatory expenses, including loan EMIs, rent, SIPs, and other like expenses. This fund is crucial since life events like suddenly quitting job or coping with a major illness are erratic. An unexpected financial crisis of this kind can compromise a borrower’s loan payback capacity, so resulting in ongoing EMI payments to fail. In these kind of situations, definitely having a sufficient emergency fund would be very beneficial. You should think about using your emergency fund to pay back the personal loan EMIs should any kind of financial crisis cause you difficulties returning loan EMIs. This will help you avoid late payment penalties and could also protect your credit score from any kind of damage any type of delay or missed EMI could inflict.
If you want the interest on your personal loan to be lower, change lender to best bank for personal loan.
Should a personal borrower struggle to make the monthly payments (EMIs) on their current loan, it is advisable to consider the balance transfer option to a different lender. This will enable them to reduce the monetary monthly payback value. It is advisable to evaluate many lenders on several criteria, including 5 lakh loan interest rates, tenure, processing fees, and so on, before deciding on a specific one. After doing this, go to the lender offering reduced interest rates together with better loan terms. By helping to reduce the monthly installment values, you would be able to pay the smaller EMIs for your personal loan. Though you are forward with your decision to migrate your balance, the new lender will most likely see your request as a new loan application. This would thus allow them to impose some related fees, such a processing fee. This makes it imperative to make sure that the total amount of money saved on interest expenses through balance transfer is significant and that the expenses resulting from the transfer do not turn out to be more than the benefits of the transfer.
Sort your debt and loans.
For borrowers—especially those who are servicing multiple loans—repayment of current personal loans is a regular difficulty. Sometimes the borrower finds it difficult even with regard to the financial obligations of paying back several EMIs on time and consistently, each with a different interest rate and due date, depending on varying income or when pressing financial demands exist. Those that meet this criteria have the choice of debt consolidation. Should they go with this option, they will have to pay back only one consolidated E MI at lowered personal loan rates rather than several EMIs at varying rates.
For instance, housing loan borrowers could decide to have a top-up for their house loan. This is so since top-up home loan interest rates are often far lower than those of other loan options, such personal loans. If the borrower uses the top-up loan to prepay other loans, they simply have to pay back the EMIs for the home loan and the top-up loan instead of several expensive loan EMIs.
Borrowers without a house loan and who are trying to pay back high-cost loans including personal loans, business loans, and so on could wish to look at acquiring secured credit facilities including loans against property or gold loans if they have the necessary asset. Usually, these loans have interest rates far below the average. Prepayments on loans already in use with high interest rates can be made from loan proceeds gathered from several borrowing sources.
Final thoughts
Personal loans such as a 5 lakh loan taken from best bank for personal loan most of the time serve as a catalyst in our life, enabling us to offset debt or meet other financial objectives. Therefore, one must definitely understand and follow the above suggested ideas if one is to properly control the EMI repayments.
