5 key tips while making personal loan EMI payment

Are you considering taking out a personal loan to meet your urgent financial needs? Personal loans are a convenient option for quick funds, whether for home renovations, education expenses, medical emergencies, or anything else. However, managing personal loan EMI payments can sometimes become overwhelming once they get sanctioned.

While defaulting or delaying your personal loan EMIs can have serious consequences, including a negative impact on your credit score, you can repay your loan without hassle with a little effort and discipline. So, let's dive in and explore these tips to help you stay on top of your personal loan EMI payments.

Common pitfalls borrowers face during personal loan EMI payment
 

Planning your loan EMIs can go a long way in avoiding possible financial pitfalls. But only some people are careful of this. 

Here are five common pitfalls that borrowers face during personal EMI loan payments and ways to avoid them -

· Missing payments 
 

Many financial institutions typically impose a penalty of 1%-2% of the lapsed payment amount to encourage timely loan EMI payments and maintain payment discipline. Staying updated with your personal loan payment schedule and establishing automatic payments or reminders to ensure punctual payments is imperative to prevent such a scenario.

· Overlooking interest rates
 

When you take out a personal loan, consider the interest rate and how it affects your monthly loan EMI payment. If you overlook the interest rate, you may pay more than you borrowed. Therefore, it's essential to understand the interest rate and its impact on your loan repayment schedule.

Also read - 6 Tips for how to get a Personal Loan without any hassle

· Ignoring prepayment options
 

Many borrowers are unaware of the benefits of prepaying their loan EMI. Prepayment options can reduce the overall cost of the loan and shorten the repayment tenure. However, some borrowers overlook this option, leading to higher loan costs in the long run. It's crucial to understand the prepayment options available and take advantage of them to reduce your loan's overall cost.

· Late payments
 

 Late payments can increase your loan's total cost and impact your credit score negatively. To avoid late payments, you should set up automatic payments or reminders and ensure sufficient funds in your account to cover the loan EMI payment. For instance, IDFC FIRST Bank provides affordable late fee payments for their loan services, including a provision of up to 2% of the unpaid EMI or up to INR 300, whichever amount is higher.

· Opting for longer tenure 
 

Many borrowers opt for a longer tenure to reduce their monthly EMI payments. However, this can result in higher interest charges and increase the overall cost of the loan. It's vital to weigh the pros and cons of longer tenure and choose the repayment schedule that suits you best.

· Borrowing more than you can afford
 

 Taking on more debt than you can comfortably repay can result in financial stress and even the risk of loan default. Before taking out a loan, assess your financial situation, and borrow only what you can afford to repay comfortably. This will help you avoid financial pitfalls, stay within your monthly budget, and maintain a healthy credit score.

​​Tips for managing your personal loan EMI payments effectively
 

Managing your loan EMI payments is crucial to maintaining a healthy credit score and avoiding late payment fees. Here are five useful tips to help you manage your loan EMI payments effectively -

· Understand the terms and conditions 
 

 Before applying for a personal loan, read the terms and conditions of the loan. This includes the interest rate, repayment tenure, processing fees, prepayment options, and any other charges associated with the loan. Ensure you know the loan's terms and conditions and ask your lender for any clarifications if needed.

· Set up automatic payments
 

Missing payments or paying late can have serious consequences on your credit score and may also attract penalty charges. Consider setting up automatic payments for your personal loan EMI to avoid this. Many banks and financial institutions allow them to automatically deduct the EMI amount from your account on the scheduled due date. This ensures that your payments are made on time, reducing the chances of missing payments or paying late.

· Consider pre/part-payment options
 

 Many borrowers are unaware of the pre/part-payment options available for personal loans. Prepayment allows you to repay a part or the entire loan amount before the end of the loan tenure. This can help you reduce the overall personal loan interest charges and repay the loan faster. However, it's important to understand the prepayment terms and conditions. Some lenders may charge prepayment penalties or have certain restrictions on the frequency or amount of prepayment allowed.

· Borrow what you can afford and repay
 

 It's important to assess your repayment capacity and borrow what you can repay comfortably. Avoid borrowing more just because you are eligible for a higher loan amount. Consider your monthly income, expenses, and other financial commitments before deciding on the loan amount. Borrowing within your repayment capacity will help you avoid financial strain and ensure timely repayment of your personal loan EMI.

· Compare fees and charges from different lenders 
 

 Personal loans come with various fees and charges, such as processing fees, prepayment charges, late payment fees, etc. Comparing these fees and charges from different lenders is important before choosing a loan. For instance, IDFC FIRST Bank offers personal loans with affordable fees and charges, including up to 3.49% of the loan amount as processing fees.

Also read - Managing your finances with an ongoing Personal Loan

​​Conclusion
 

By creating a budget, setting up auto-payments, staying organised, considering prepayment options, and seeking assistance, you can stay on track with your personal loan EMI payments and avoid late fees or penalties. 

IDFC FIRST Bank offers a range of personal loan EMI options with flexible repayment options to suit your needs. IDFC FIRST Bank's hassle-free, digital application process allows you to apply for personal loans instantly within minutes. You can also choose flexible repayment tenures of up to 60 months and loan EMI payments at competitive interest rates. Apply now and take 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision