Personal loan blues? Try these 7 easy repayment strategies

To manage personal loans effectively, use online tools to track payments, prioritize EMIs, and automate payments.

Smart ways to manage personal loan

Manage personal loans effectively by tracking repayments using online tools, prioritizing EMIs, and automating payments. Use windfalls for part-payments to reduce interest. Always borrow responsibly and monitor credit reports for financial health and potential fraud.

In times of emergencies, unforeseen needs, or life-altering events, a personal loan can be a lifesaver. The real challenge lies in having a plan to track repayments efficiently and on time after you receive your funds. Poor personal loan management can lead to financial stress buildup, a drop in credit score, and mounting debt.

Here are some easily implementable strategies, backed by experts, that can help you manage your loan payments and have a more peaceful repayment experience.

1. Understand your repayment schedule

Before you proceed; ensure you understand the detailed structure of your EMI. Know your:

Tenure/duration, due date, and EMI amount

Total interest payable

Regularly using an online loan tracker or EMI calculator from your loan provider will help avoid surprises and better prepare you for your budget each month.

2. Prioritize your EMI in your budget

Just like rent or utilities, your EMI is a non-negotiable monthly expense. Set aside your EMI before allowing yourself to spend elsewhere, including discretionary purchases like eating out or buying something.

3. Opt for auto-debit facility

By setting up a debit mandate with your bank, you can ensure EMIs are paid on time each month without any human intervention. This not only safeguards your credit history but also eliminates late payment charges.

4. Consider part or prepayments

If you receive a windfall amount, use a percentage of it towards part-payment. This will reduce your overall interest burden by lowering your outstanding principal. Alternatively, if your loan terms allow, you can also consider a full prepayment after carefully considering any potential prepayment charges.

5. Avoid taking multiple loans

While personal loans are accessible and unsecured, borrowing more than you can afford can significantly strain your budget. Multiple outstanding loans can put you in debt and restrict your future borrowing ability. Always approach alternative borrowing options as one loan at a time and repay them before exploring other possibilities.

6. Refinance if interest rates drop

Keep in mind that refinancing your personal loan might make sense if market interest rates drop significantly or if your personal credit profile has improved. Consider transferring your loan eligibility to another loan provider with better terms to pay off the remaining balance of your loan.

7. Regularly monitor your credit score

Timely payments improve your credit score, making you eligible for loans and borrowing money in the future. Ensure your loan provider accurately reports EMIs and monitor your credit report. This helps track your financial progress and also alerts you to fraud or errors.

In conclusion, a personal loan can be a stress-free experience if you plan and are diligent with your payments. If you are disciplined with your budget, make timely payments, and borrow wisely, you will manage your loan repayment and even prepay and save on interest.