Loans and credit cards, in every form, assist you in any aspect of your everyday life, whether it's purchasing assets that you couldn't otherwise afford with your salary or savings, dealing with emergencies, or even advancing your career.
Although it has become easier to obtain loans or credit, it is critical to recognize that the borrower must complete the repayment process within all deadlines.
Through this article of ours, we try to bring in certain pointers that can help you clear off your loans with ease:
Separate Budget For Your EMIs
Once a loan is availed, you've made a legal promise to make sure your EMIs are paid on time. Create a separate budget for your EMIs if you notice that your expenses are constantly eating into your EMIs. If necessary, set up a charge-off facility (This facility ensures that your employer pays off the EMI. amount to your lender before crediting your salary account). You may also arrange your EMI debit or payment to occur near your salary credit date; so that it is paid off until you withdraw your salary for other purposes.
Pay The Loans With Higher Rate of Interest First
We have a quick tip for you if you have several loans that you want to pay off.
You may be aware that there are loans for various reasons, such as a personal loan that is unsecured and can be used indefinitely, a home loan that is secured against the home purchased with the loan, and a gold loan that has collateral attached.
Similarly, each loan is priced or paid a different rate of interest based on the risk associated with that specific loan. Secured loans typically have lower interest rates than unsecured loans because the borrower has issued security that can be sold to repay the loan if the borrower defaults. As a general rule, the higher the interest rate, the higher the EMIs.
So, if you have several loans, start with the one with the highest interest rate. You will pay less interest as a result of doing so.
Go In For Debt Consolidation Loans
Our next tip is for you if you have several debts and are struggling to pay off the EMIs, or if you keep losing an EMI here and there.
You may want to consider Debt Consolidation Loans. These loans have been designed with your convenience in mind. Debt consolidation loans combine several loans with varying interest rates into a single loan with a fixed interest rate.
Refinancing your Loan
Many times, when a loan is accepted, it is done at a higher interest rate for a variety of reasons, such as a poor credit score or a poor financial situation of the borrower. However, there could be a change in the situation in the future, resulting in higher interest rates. It could also be a loan taken out at a time when the interest rate was significantly higher but has since dropped. Individuals may consider refinancing their existing loan under these circumstances. By refinancing, we say replacing your current loan with a new loan with a lower interest rate.
Prepay Your Loans
Prepaying the entire loan, or even only a part of it, is a great way to guarantee that you can pay off your loan much sooner than the original term. You will save a lot of money this way.
This choice is especially useful when the loan term is longer or the interest rate paid is higher, as is the case with home loans and personal loans. In all cases, you have the option of repaying a small portion of your loan per year or saving up to pay it off all at once.
Increasing your EMIs as your wage or income rises is another simple way to ensure that you can easily repay your loan.
Finally, we'd like to emphasize the importance of borrowing just as much as you can safely repay, as well as the importance of paying your EMIs on time to keep your credit safe for potential borrowings.