Availing a loan has become a lot easier today as most lenders offer instant loans online. While simplified access is one aspect of the experience, managing the loan is the other. As a borrower, you are responsible for repaying your dues and there are ways to ensure a hassle-free experience.
One way to simplify repayment is to budget properly and plan the loan accordingly. However, the strategy you employ will depend on the terms you get for the personal loan and your financial capabilities.
Read on to know how to optimise your budget to manage your personal loan EMIs and repay the loan with ease.
Borrow Within Your Repayment Capacity
While a personal loan is a versatile tool, you must consider your repayment capacity before you borrow. This is because you get charged interest on the sanction and the EMIs are also impacted based on this amount.
To get an idea of how much you can manage, use a personal loan eligibility calculator. This tool can help you calculate the maximum amount you are eligible for within your current financial standing. In most cases, all you have to do is enter the following:
- Your age
- City of residence
- Monthly expenses
- Employment status
Based on these parameters, you will get an estimate of the loan amount you can get. Ideally, you should avail a loan within this limit, as exceeding it will exert a lot of pressure on your income. High monthly payments are stressful, but with a suitable sanction, you can handle payments with ease.
Choose the Ideal Repayment Tenure
In addition to your personal loan amount, the tenure of the loan matters as well. While banks and NBFCs decide your interest rates, you can choose a tenure as per your budget. Here, the general rule is that your EMIs are lower with a higher tenure, and vice versa.
As such, you can adjust your loan terms to reduce your EMIs considerably. This is because lenders allow a maximum of 6 years[EW1] . An easy way to understand your EMI obligation is to use an EMI calculator.
All you have to do is enter the loan terms and calculate the EMI amount, total amount payable, and the interest payable. Here, you can also tweak the tenure value to find a suitable EMI. Ideally, you should pick a tenure that perfectly balances your EMI against the interest payable.
Implement the 50/30/20 Rule[EW2]
The 50/30/20 rule is a smart budgeting and finance management technique that can help. With this technique, you split your net income into set ratios to achieve short-term and long-term financial goals.
According to this budgeting technique, 50% of your income goes towards your expenses and financial obligations. You reserve the 30% for your wants, such as shopping, dining and other leisurely expenses.
The remaining 20% of your income must go towards investments and savings, which may be used to close your loans. So, when the goal is to manage your EMIs efficiently, ensure that it fits within the 50% ratio. This way, you still have enough left over for other expenses.
Plan to Prepay During the Tenure
One of the easiest ways to set yourself up for success when managing a loan is to set aside a portion for prepayment. Prepaying a loan simply means paying the outstanding loan amount before the tenure ends. Here, you can either fully prepay the loan or opt for a partial prepayment.
While both options help, the latter is a lot more accessible for most borrowers. Here, you pay a portion of the outstanding sanction, and this lowers your EMI burden. As such, it makes managing the loan easier down the line.
In addition to re-evaluating your budget and personal finances, comparing multiple lenders to get the most affordable option is important. With the Bajaj Markets App, you can easily compare multiple personal loan offers from the top lenders.
After comparing multiple options, you can directly apply on the app with the simple loan application process. Get your instant personal loan today by simply downloading the app from the Google Play Store or App Store.