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Tips to Reduce Personal Loan EMI

With a few easy tips, you can easily manage your loan repayments; see how:

  • right-arrowPre-payment & Part-payment
    Lenders offer part-payment and pre-payment options on personal loans with which you can reduce the EMI burden. In part-payment, you can pay some extra EMIS and reduce the loan outstanding to adjust the EMIs accordingly. Meanwhile, with pre-payment, you can clear the total outstanding principal and save on remaining interest payments.
    right-arrowLonger Repayment Tenure
    In personal loan, the maximum tenure is 5 years, and the longer the tenure of your loan, the lower your EMI will be. So, if you are struggling with EMI payments, talk to your bank and request a loan restructuring. With this, you can easily pay off the borrowed amount in reduced EMIs without any hassle.
    right-arrowSwitch to a Better Lender
    Find a lender with a lower interest rate and transfer your existing loan. This will reduce your EMI and provide you with better terms and conditions. But do ensure you compute all the charges (balance transfer fee) when switching lenders.

    • Benefits of Reducing Personal Loan EMIs

    A lower EMI helps you in many ways. Let’s see the list of benefits you have:

  • right-arrowBudget Management: Reduced loan EMIs allow you to take care of the other expenses without disturbing your loan repayment. So you can easily maintain a healthy balance.
    right-arrowGood Credit Score: Having a reduced EMI means fewer chances of default. And this regular payment behaviour of yours will earn you a good credit score.
    right-arrowPre-approved Offer: Impressed with your ongoing EMIs, the lender may offer you a pre-approved loan. This will allow you to get a loan instantly without much documentation or processing time.

    • Risks and Considerations to Reduce Personal Loan EMI

    When considering using the above tips to reduce your personal loan EMI, you should also know the risks associated with them:

  • right-arrowImpact of Longer Tenures on Total Interest Paid: Surely, a longer repayment period will get you reduced EMIs, but there is a drawback to it. A longer tenure implies more interest payout. The EMI might have been reduced, but the total payment on interest has increased after choosing a lengthy tenure.
    right-arrowPrepayment Charges and Fees: Requesting a prepayment means you will close your loan before the stipulated period. And to cover the loss of interest payment, the bank charges a prepayment penalty. This amount is around 2-3% of your outstanding principal. Considering this amount, calculate your total prepayment amount. Doing so will give you a clear picture of total savings
    right-arrowTime for Loan Transfer: Check how many EMIs are left to pay on your personal loan. Transferring it to a new lender when you are nearing the end of your tenure won’t help you save anything; transfer a loan when there are more EMIs left to pay and the high-interest burden is making it difficult. Also, add the balance transfer fee to your calculation when computing the savings amount.

    • Conclusion

    When you borrow a personal loan, you have a clear set of goals for getting the desired amount. But what happens when you get the loan amount? The repayment begins, and due to a hurry, you might have chosen the wrong loan offer.
    Opting for prepayment or partial payments helps you reduce the burden of EMI. It not only saves you money but also brings several other benefits. It's about being responsible with your finances and making an informed decision.
    So, if you are considering reducing a personal loan, keep these points in mind.

    Frequently Asked  Questions

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    How to pay an extra EMI?
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    Is it a good idea to repay a personal loan early?

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