Personal loans are an unsecured category of loans that do not require any collateral or security for meeting short-term requirements. Both salaried individuals and self-employed borrowers can choose personal loans which are accessible easily from banks, NBFCs, and other financial institutions. However, personal loans also have one of the highest rates of interest compared to other types of loans. Hence, the EMIs burden is generally higher in personal loans. Can you minimise your EMIs burden?
Typically, a personal loan is a very common loan product, and various segments of customer avail of this type of loan for a variety of purposes ranging from buying white goods, traveling, buying vehicle, buying jewellery, wedding expenses, etc. Also, some borrowers take personal loans to bridge the funding gap for buying a home, paying their own contribution, home renovation, etc.
According to Pramod Kathuria, Founder & CEO, of Easiloan, EMI is calculated based on loan value, tenure of loan, and rate of interest charged. There are several key aspects that customers can consider to smartly plan EMIs or reduce existing personal loan EMIs. These are:
– Personal loans typically have a much higher rate of interest than other loan products. Hence it is very important to consider key aspects to smartly plan the EMIs or reduce existing personal loan EMIs.
– Take the right category loan. For home improvement or home buying, there are home loans, home improvement, interior loans available by way of new home loans, and top-up loans that customers can consider. Since the rate of interest (ROI) is lower and tenure is much higher EMI is significantly reduced with such loan products.
– Auto loans for the purchase of vehicle new or resale to consider against personal loans to avoid higher rates of interest. The tenure for an auto loan may be higher further improving the EMI amount. Also, often lenders run attractive schemes with Auto sellers that either reduce the EMI or offer a discount to customers.
– Shifting of loan – In order to reduce EMIs customers can transfer the loan to a different lender who is charging lesser interest and offers longer tenure.
– Prepayment or part payment of the loan amount will help reduce the EMIs keeping the tenure the same or can reduce the tenure of the loan.
– Adding Co-Applicant in the loan may help secure better tenure and loan amount and hence can offer more options for customers.
Easiloan CEO stated that general prudence for any loan product is to consider the right loan product for the purpose. Study various options available, take the right amount of loan that allows the customers to pay for monthly expenses and outgoings without taking any additional stress or using high-interest rate credit facility. Making timely payments towards EMI and keep reducing such higher interest rate loans.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.