HomeFinancePersonal FinanceGot a loan sanctioned? 5 suggestions to manage it smartly

Got a loan sanctioned? 5 suggestions to manage it smartly

Prepaying a loan can derive substantial savings in the interest expense, specifically if you do so throughout the initial years of the loan.

A loan can aid you meet economic shortfalls and fulfil objectives that can’t be met with our personal sources. However, possessing a loan comes with repayment commitment, non-adherence to which can adversely influence your economic wellbeing.

Following these 5 uncomplicated suggestions can aid you handle your loan burden:



1. Avoid irregularities in EMI payments

Timely repayment of loan EMIs and credit card dues receives the highest weightage amongst all the things regarded as by the credit bureaus when calculating your credit score. Hence, create the habit of repaying EMIs by their due date. Failure to repay the dues on time can attract hefty charges and a reasonably greater interest price. In addition to this, non-repayment of EMIs on time can also have a damaging influence on your credit score and future loan and credit card eligibility prospects.



2. Include loan EMIs in the emergency fund

The key goal of producing and keeping an sufficient emergency fund is to deal with unforeseen economic exigencies like sudden job loss, extreme illness, disability or other adverse events. Ideally, the size of our emergency fund need to be equal to at least six months’ unavoidable month-to-month expenditures, which includes rent, insurance coverage premiums, EMIs, and so forth.

Having sufficient emergency funds would make it simpler for you to continue repaying EMIs throughout economic exigencies, and thereby save you from incurring late payment penalty, greater interest expense or adverse influence on credit score.

3. Opt for balance transfer anytime feasible

Balance transfer choice enables you to transfer your current loan to other lenders at a reduced interest price. This assists in minimizing the general interest expense and EMI burden. Existing loan borrowers possessing substantial residual loan tenure need to evaluate the interest price levied on their loan with these extended by other lenders. The greatest way to do so is by going to on the net economic marketplaces. These platforms fetch loan provides offered from a variety of lenders based on your credit score, month-to-month revenue, job profile, employer profile and other facets of your credit profile.

Try to negotiate with your current lender to minimize the interest expense, in case the interest price extended by other lenders leads to substantial savings in your current loan’s general interest expense. Go ahead with the balance transfer choice if your current lender refuses to reduced the price.

Also, prior to working out the balance transfer choice, make sure you element in applicable prepayment charges, if any, levied by your current lender, and processing charge and other connected charges levied by the new lender. Go ahead with the balance transfer choice only if the general savings on interest expense considerably outweigh the connected charges.

4. Prepay loan when you have surplus funds

Prepaying a loan can derive substantial savings in the interest expense, specifically if you do so throughout the initial years of the loan. Try to prepay the loan anytime you have surplus funds. In case you are servicing many loans, attempt to prepay the loan with a greater interest price 1st.

Before prepaying any loan, make sure you element in applicable prepayment charges (if any). Although the RBI debars lenders from levying prepayment charges on floating price loans, they are absolutely free to levy prepayment charges on fixed-price loans. Go ahead with the prepayment choice only if the savings in the general interest expense considerably exceed charges levied on loan prepayment, if any.

You will have to also desist from prepaying or foreclosing a loan by using your emergency fund or investments earmarked for critical economic objectives. Doing so can force you to avail costlier loans to deal with economic exigencies or to obtain these critical economic objectives.

5. Periodically critique your credit report

Credit report summarizes your loan and credit card-associated activities, as reported by the lenders and credit card issuers. Credit bureaus calculate your credit score based on the details captured in your credit report. Thus, any error on element of the lender or bureau or even a fraudulent activity in your credit accounts can adversely influence your credit score. The only way to mitigate this danger is by pulling out your credit report at periodic intervals.

Frequently reviewing your credit report, ideally at least after in 3 months, can aid access customized and pre-authorized loans, balance transfer and credit card provides based on your credit profile.

(By Gaurav Aggarwal, Senior Director, Paisabazaar.com)



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