Monday, September 26, 2016, AM | 2 Comments
Before you go in for a personal loan, you’ll need to understand the basic concepts.
Firstly, interest rates are charged based on the amount you’ve borrowed. The higher the amount, the higher the interest you’ll pay.
The tenure is another crucial factor. The impact of tenure is directly on the EMI that you would be paying.
To eliminate added pressure on your wallet, you can try and reduce EMI by altering the tenure of your personal loan.
Before your personal loan gets approved, make use of a EMI calculator for personal loan and determine the amount that you would be charged with while paying the interests on your loan amount. This would ensure that you are clear as to what kind of personal loan tenure you would be comfortable with.
Here are some tips on how to reduce EMI on your personal loan:
Choose a Longer Tenure
Personal loans are given out by the banks or financial institutions generally for a maximum period of 20 years.
The EMI therefore would be spread out over these years, depending on the loan that you have borrowed.
The shorter the tenure, the higher your EMI would turn out to be, therefore, opt for those lenders who allow you to take personal loan for a longer tenure since the impact of long tenure would affect your EMI.
You can even try negotiating with your existing bank for altering your personal loan tenure.
Pay off Loans with Higher Interest Rates
You can determine well in advance as to which loan would have higher interest rate and the resultant EMI that you would have to pay, by making using of loan EMI calculator.
Experts suggest choosing “Avalanche effect” which means paying off the loans with highest interest rates first and subsequently moving on to the low interest rate on personal loan amounts.
Generally, personal loan of any kind comes with a higher interest rate, and therefore, opting for this method would ensure that at the end of the tenure, you are able to save costs on the EMI that would otherwise accrue if you choose to pay smaller loans first.
Increase Pay with Increase in Income
During the tenure of your personal loan, if there is an increase in your income, it is advisable to increase the amount you would be paying as your EMI, so that the overall saving is more.
Even a modest increase in the amount you pay towards your EMI would ensure extra savings at the end of the tenure. Therefore, amp up your EMI payment to reduce the overall EMI costs burden that would fall on you.
If you make use of the above tips to pay off your personal loan, you can not only successfully reduce the EMI that is payable, but also increase your savings at the end of the loan tenure.
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