An increasing number of people are opting for personal loans to fulfil their present financial shortcomings. In fact, an immediate personal loan can cater to both unforeseen and planned expenditures like:
- Medical emergencies
- Higher academic costs
- Wedding expense
- Travel purpose
- Home renovation/purchase
The list is endless as the loan has no end-use restriction and is entirely unsecured. However, paying off the loan can be a tedious task. A debtor needs to adapt to multiple factors with proper financial management to repay the loan.
Here’s a comprehensive guide to make the repayment schedule of a personal loan comfortable and financially feasible.
Personal loan with ideal repayment tenors
Tenor seems to the most vital factor that influences a debtor’s EMIs. A shorter tenor with higher EMIs can help you save on the total interest amount. On the other hand, a longer tenor increases the overall interest component with low EMIs. So, a debtor must figure out the exact EMI he/she can afford to conclude on ideal repayment tenor.
Several factors come into play to determine the monthly payments such as:
- Monthly income
- Monthly liabilities
- Surplus
Borrowers should choose the EMIs and repayment tenors as per these factors. They should also utilise a personal loan EMI calculator to get an overview even before the application of a loan. This again can help any user to calculate a budget and maintain a low debt-to-income ratio.
Such offers are also applicable for their existing customers applying for a personal loan with a low CIBIL score.
Important prepayment terms and benefits
Prepayment of a loan is also an important factor as it suggests clearing the credit before the stipulated time. So, when a borrower has surplus funds, he/she can contribute an extra sum to repay a fraction of the total loan amount. Several financial institutions also provide the option to prepay the personal loan’s EMI after the 3rd instalment without levying additional charges.
There’s no maximum threshold for prepayment amount once a debtor successfully clears the first EMI. Prepaying an immediate personal loan or any other loan will save a lump sum of total interest while reducing the EMIs simultaneously.
Benefits of repaying the loan on time
Paying off loan on time has certain advantages
-
Positive impact on credit score
A good credit score is based on two significant factors
- Credit history with resolved loans or credit card dues
- Instalment defaults
So, timely loan repayments can have a positive impact on the score to a great extent. A credit score of above 750 deems an individual as credit-worthy. Such individuals are eligible for the best loan terms and offers from leading lenders.
-
Improve relationship with the lender
Another primary advantage is paying off the loan improves the relationship with an existing lender. The financial institution recognises the borrower’s debt management skill and marks him as a responsible individual. Moreover, individuals in future can have financial aid from the same lender without any hurdle.
Clearing the debts of a personal loan takes a little responsibility and a calculative approach. The repayment tenor is one of the most vital aspects that a borrower needs to ascertain before he/she opts for an immediate personal loan or any other such advances. Successful planning helps in comfortable execution of the loan repayment over the tenor other than garnering a credit-worthy financial profile.
