Personal loans are the contemporary financial tools to fund a host of needs, from luxuriant goals like destination weddings to emergencies like unexpected medical expenses. However, many borrowers become negligent with time, throwing discipline out the door, and start missing EMI payments.
Defaulting on personal loan EMIs is a double-edged sword; on one end hangs the CIBIL score, and on the other, piling of debt. However, a little but solid planning goes a long way in keeping you from drowning in this miry clay.
Discussed below are useful tips for avoiding defaulting on personal loan EMI payments.
Tip#1 Look Before You Leap
Haste makes waste! Planning out your personal loan EMIs in advance is the first step towards ensuring that you never default on an EMI payment. To do so, assess your monthly budget alongside your financial obligations and then opt for an EMI amount you are comfortable paying. Ideally, keep at least 60% of your monthly budget for other financial commitments, with the rest dedicated towards personal loan repayment.
You can use a reliable online tool such as a personal loan EMI calculator to determine your ideal EMI amount.
Tip#2 Opt for a Shorter Tenure
Many personal loan borrowers opt for a longer tenure to pay less EMIs every month. However, profitability here is an illusion. In truth, a longer tenure means higher money outgo in the form of interest. Hence, if possible, go for a shorter tenure. Not only will it help you avoid personal loan default, but will also enable you to close your loan sooner.
Tip #3 Maintain a Good CIBIL Score
A CIBIL or Credit score not only plays a huge role in determining personal loan eligibility but also the loan amount and interest rates you’re charged. A high CIBIL score will pose you as a low-risk borrower and help bag exciting deals on your personal loan, thereby facilitating an EMI amount that you’re comfortable paying.
Tip #4 Stay Disciplined
Discipline is painful; however, it is better to suffer the pain of discipline than experience the pain of regret. Making timely personal loan EMI payments may seem like a breeze until a sudden expense comes up, tempting you to use the EMI money. This is why it is crucial to stay disciplined; make it a habit to shelve out the EMI amount at the onset of a month. Doing this will help you keep your personal loan default rate at null.
Tip #5 Automate Your Repayment Schedule
There may still come a time when maintaining discipline seems like a significant challenge. To be on the safe side, it is best to automate your personal loan EMI payments. By doing so, you can bid goodbye to all your fears associated with personal loan default. But, make sure that you have sufficient funds in your bank account every month for the same.
Additionally, you must compare lenders and choose the one offering lower personal loan interest rates. Also, if possible, make a higher downpayment to lower the personal loan EMI amount.
Want to apply for personal loan? Lenders offer personal loans for self-employed and salaried individuals at competitive ROIs. Add to it; instant personal loans are available with minimal paperwork. But, before you avail a personal loan online, take the necessary steps from the very beginning to avoid future default as defaulting can have significant repercussions.
