Personal loans are the preferred choice when you want instant funds to cover your planned or urgent expenses. Most of these loans come with flexible repayment tenures that you can choose as per your convenience. Choosing an extended loan term reduces the EMI amount and makes repayment more manageable. However, managing it for such a long time becomes challenging for many. Therefore, here are a few top tips to help you manage a long-term personal loan efficiently.
1. Make a Budget
Making a budget is the best step to improve your financial situation and manage loans better. Managing a long-term loan without budgeting makes you confused and vulnerable. You don’t know where your money is going and how much you are spending unnecessarily. If you save less than you should, creating a budget would be the best answer.
To create a budget, categorise your expenses into groceries, bills, entertainment, etc. Broad and simple categories make calculations and monitoring easier. Once you identify your unnecessary expenses, try to keep tabs on them to make loan management easier.
2. Pay Your EMIs on Time
Paying your EMIs on time every month is an efficient way to avoid late payment penalties. Missing payments also reduce your credit score, which ultimately affects your creditworthiness. With better financial management, you can stay on top of your EMI payments and avoid these consequences. Once you create your budget, you will find EMI payments much easier to manage.
Make a financial plan and keep a portion of your income aside every month to pay your due EMIs. If you keep forgetting your EMI payments, consider activating the e-mandate to pay your EMIs from your bank account automatically. Another tip is to pay one early EMI as you receive your loan amount. Doing this will keep you ahead of your EMI payment plan and give you a buffer against a missed EMI.
3. Pay Extra Whenever Possible
Just like paying one early EMI, paying extra whenever you can also maintains a buffer for a missed payment. This critical strategy keeps you ahead of your repayment term and attracts additional perks from your lender. Paying extra will reduce the overall loan term of your repayment plan and help you clear your debt sooner. Paying your personal loan earlier will save you money by lowering your interest outgo. Besides that, paying debts faster than the loan term will increase your credit score. As a result, you improve your chances of instant loan approval in the future at reduced interest rates.
If you consider paying extra on your loan EMIs, ask about the pre-payment charges you need to pay to the lender. While many lenders allow borrowers to pay loans faster without pre-payment charges, others may charge hefty pre-payment charges. Since such charges negate the advantages of early loan repayment, enquire about them to build a lucrative strategy.
4. Consolidate Your Debt
If you are managing multiple loans, consolidating them would be an excellent way to simplify your debt management. When you do that, you take out a single, bigger loan to repay all your existing loans. Then, you make a single payment to one lender, rather than making multiple EMIs to several lenders each month with different loan terms, interest rates, and other requirements. Many people take long-term personal loans to consolidate their debt and pay their EMIs over several years.
Debt consolidation is particularly helpful if you pay high-interest rates on some loans. However, before taking a personal loan for debt consolidation, check your budget and ensure that you can pay its EMIs on time.
5. Maintain a High Credit Score
Closely monitor your credit score while managing your long-term personal loan. This 3-digit number plays a crucial role in your financial history, and lenders give it due importance while approving your loan application. Your credit also significantly impacts your loan amount, interest rate, and repayment term. It reflects your credit behavior and repayment history. Staying ahead of your loan EMIs helps you maintain a high credit score and improve your credibility for the future.
6. Use Automatic Payment System
If you keep forgetting your EMI payments, try setting up an automatic debit directly from your bank account. By doing that, you don’t need to remember to pay your EMIs each month. The EMI amount will be directly debited from your bank account and transferred to the lender. However, you need to ensure that you maintain a sufficient balance in your bank account before the due date. One helpful tip would be to set up the automatic debit a couple of days after your payday. There are high chances that you will have enough money in your bank account on that date.
7. Control Expenses and Save Money
When you create your budget, you will identify where you are spending your hard-earned money unnecessarily. Little expenses here and there quickly add up and disturb your budget. Reduce your movie dates and dine-outs, control those impulsive shopping urges, and switch off lights to save on utility bills. Money-saving tips like these help you save a little more, which you can put towards your EMI payments. Once you pay off your loan, you will have enough money at your disposal to fulfill the urges you controlled all these years.
Managing long-term personal loans becomes stress-free and pretty straightforward once you work out the tips provided above. Stay disciplined with your finances, set a budget, and pay your loan EMIs regularly to stay ahead of the curve. Once you become debt-free, you will breathe easier and enjoy the money you have on hand.
Are you looking for funds to cover your expenses? Apply for an instant loan for a loan term of up to 24 months and use the tips mentioned above to manage it like a pro.