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Prudent measures to reduce your existing personal loan EMI and interest rate
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Personal loans offer quick access to loan proceeds at an attractive interest rate without the requirement of pledging any security. Moreover, the proceeds of the loan can be used for various purposes, ranging from funding your child’s higher education to meeting monetary mismatches during a vacation abroad. These attributes make personal loans the best funding choice at times when you require funds immediately.
However, no matter how beneficial the loan is, it is a debt after all, which you must repay along with the applicable personal loan interest rate in the form of Equated Monthly Instalments (EMIs). Hence, before you hit on the personal loan apply online option, you must always ensure to avail only the amount of funds that you require and avoid unnecessarily availing a higher sum.
In case you are financially stressed with your existing personal loan debt, here are some measures you can consider to reduce your overall personal loan EMI and interest rate.
The balance transfer option allows you to transfer your outstanding loan dues to a new financial institution. With this facility, you can transfer your outstanding personal loan at a lower rate of interest and save on interest cost. You can also choose a higher repayment tenure, which can help you to reduce your personal loan EMI amount.
For making an informed decision, you can consider using an online personal loan EMI calculator. With this calculator, you can efficiently calculate the new EMI and the interest constituent to decide if the balance transfer will be beneficial for you.
You can consider making part prepayment if you are looking to lower the burden of your existing personal loan. Many financial institutions permit you to make partial prepayments of a substantial amount after you have met a predetermined number of EMIs. Partial prepayment can allow you to reduce your loan EMI and tenure, which may help you become debt-free faster.
A step-down plan is where your EMI repayments fall every year. Here in this plan, you typically need to repay a major portion of your principal amount along with the interest constituent in the starting repayment years. As the loan repayment tenure progresses, your personal loan EMI lowers.
By opting for the step-down plan, you can reduce your loan repayment burden considerably in the later years. This plan is best for those approaching retirement, as this enables them to repay a major chunk of their personal loan while they still have an active source of income.
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Ending note
A personal loan is a prudent option to meet your financial needs without compromising on your securities or assets. However, good debt management is essential to ensure that a online personal loan does not become a source of financial stress later on. Consider these measures to reduce your existing personal loan EMI and interest rate to effectively manage your debt obligations while meeting other financial goals.
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