At a time when most of us battle high inflation and higher living costs, we must borrow institutional loans to buy things like a home and a car. Then there are loans that pay for sudden crises, such as an emergency medical loan, or education loan. But whatever kind of loan(s) you have, you must manage them efficiently to save money and become debt-free as soon as possible.
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We present 8 fail-safe tips to manage your loans better:
#1 Consolidate your debt.
You might have several loans to your name, with a mix of secured and unsecured loans. This means you pay several EMIs per month – and each successive EMI cuts into your monthly income. Instead of paying multiple EMIs and making it harder on yourself to manage them simultaneously, you might consider consolidating all your debt under a single one. Debt consolidation is possible with quick loans or personal loans. Instead of multiple EMIs, you pay only one EMI towards the online immediate loan or personal loan.
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#2 Pay expensive loans first.
Unsecured loans like quick loans are often more expensive than secured loans like home loans. They attract a higher rate of interest, and must be repaid early to save substantially on interest money. Other loans like car loans and credit card loans are also expensive, so aim to repay those first as well.
#3 Divert any additional income towards loan repayment.
Any additional money you earn, either through a job increment or a cash gift from a friend or relative, should be diverted towards loan repayment. This reduces the burden on your monthly income, and helps you make pre-payments for early closure (see point #6 for details). Another way to approach this is to create a separate savings fund to repay the loan. Any additional cash you have on hand can be diverted towards this savings account, and periodically paid towards the loan.
#4 Get a periodic EMI adjustment.
If you have pre-paid a substantial amount of your principal borrowing, you should ask the lender to adjust the EMI amount for the balance amount. This reduces the burden on your monthly income. Lending institutions can easily accommodate the request. However, doing this is useful for a long tenure loan, such as a home purchase loan.
#5 Increase the EMI amount if possible.
Converse to point #4 above, you can ask the lender to increase the EMI amount. Doing so helps in repaying more money faster. However, you must adopt this approach only if you do not have too many demands on your monthly income, and only a single loan, such as an immediate online loan.
#6 Periodically pre-pay towards the loan.
Instead of abiding strictly by the EMI schedule, you should aim to foreclose the loan. Foreclosure simply means that the loan is repaid in full before its final EMI date. Doing so makes you debt-free much faster, and improves your credit score. You also save a lot of money on interest repayments. The best way to foreclose is to make periodic pre-payments against the principal: apart from the month’s EMI payment, aim to pay additional sums so that the principal reduces, and so does the corresponding EMI.
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#7 Port to a lender with a lower interest rate.
If another lender such as a loan app offers a lower rate of interest than your current lending institution, you can ask your current lender to revise your interest rates, or switch to the loan app to save on paying more interest money. But do check the transfer fees and processing charges before you make the switch: these must not outweigh any benefit you get from a lower rate of interest.
#8 Curtail unnecessary expenses.
Loan EMIs are repaid from your monthly income. The more money you save from your income, the more you can divert towards loan repayment. You can save more money only when you curtail unnecessary expenditure and keep a strict budget. Money saved is money earned, and these earnings can help you close your loan(s) and get out of debt much faster.
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Do you have any loan management tips to share? Tell us in the comments below.
