We live in times where the inflation rate is higher than our salary growth rate. So, it becomes tough for us to manage our day to day expenditures and aspire to buy something that may be our dream home or car.
undefined
So, we do need to resort to bank loans from time to time. However, a significant chunk of our salaries going for EMIs can be a little hard for our pockets. Here are a few tips through which we can try and reduce the cost of our loans.
undefined
Pay a higher down paymentThis is an upfront payment that you need to pay for the loan. Try saving up and paying a more significant down payment as the amount you borrow becomes less, so does your EMI. This will also help you save a lot on interest in the long run.
undefined
Chose a loan with a greater durationSince your repayment duration will be long, the burden of the loan will be distributed over a longer period, thus pinching your pocket a little less in the shorter run. However, weigh your pros and cons before you do that, as this may significantly increase your interest amount.
undefined
Choose a Step-Down EMI planThis means that you pay a higher amount during the initial part of the loan, and as time goes by, the amount you pay decreases, and the principal amount keeps decreasing. This reduces the interest burden for your future instalments.
undefined
Choose the bank where you are already a customerThis will ensure that you already have a working relationship and your creditworthiness is known to them. This will help you negotiate better terms for your loan as they would love to retain an old customer.
undefined
Pay higher interest loans firstLoans such as credit card loans charge an exorbitant amount as interest. So, if you have a paucity of funds, prioritize. Pay off the ones which charge higher interest and may the minimum amount for the rest of your loans. This will ensure you don’t pile up huge EMIs later.
undefined