Banking, Loans

How to manage EMIs to pay back less

Posted By: Admin
June 11, 2022 |

Pay EMI smartly, tricks to reduce installment amount even if there is no interest rate cut. Improve credit score

How to manage EMI: After availing any type of loan facility, the main concern of borrowers is to pay monthly installments and repay the loan. Repaying monthly installments regularly on or before the due date can help you in improving your credit score which can fetch many benefits to you. On an average a borrower pays approximately double of the loan amount when loan is availed for a longer period (from 20-30 years). If you want to know how much you will pay in total after completion of the loan, you can ask for a repayment schedule from your lender. This article is on How to manage EMIs.

However there are many ways to manage your installments and pay less compared to regular repayments. There are simple, but brilliant, tricks you can employ to lighten the load? With a carefully applied technique, you can pay off your personal mortgage , auto loan, credit card loan and any other debt you’re carrying quicker than you thought possible. These tricks won’t hurt your finances in any dramatic way, but they can make a big difference to the total interest you’ll pay over the life of the loan and help you become debt-free faster.

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Tricks on How to manage EMIs –

Make bi-weekly payments-

Instead of making monthly payments toward your loan, submit half-payments every two weeks. By doing so You’ll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years.

Pay little bit more than your fixed installment –

If your monthly installment is Rs. 5,000/- pay Rs. 6,000/-. The difference is too small to make a tangible dent in your budget, but large enough to knock a few months off the life of your loan and save you a significant amount in interest.

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Make one extra payment each year-

This way, you’ll only feel the squeeze once a year and you’ll still shorten the life of your loan by several months, or even years. You can use bonus income, tax refund, or another windfall to make that once-a-year payment.

Refinance-

By repaying the loans on time, your credit score will go high and opportunities to get a loan at a lower interest rate can be explored and you may be able to afford it easily with your lower interest rate.

Boost your income and put all extra money toward the loan.

If you are earning equivalent to your expenses and EMIs, try to open sources of extra income. Put your extra income in your loan principal amount. By doing this you will reduce your EMI and loan amount very quickly. Lesser the principal, lesser you pay the interest. Lenders charge interest on outstanding principal amounts only. Hence If you pay directly to loan principal, you will end up paying less money on loans.

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Consolidate your loan portfolio-

If you have availed more than 2 – 3 loans you can consider borrowing one higher amount of loan and repay the lower amounting loans. With this you can reduce the interest and other annual charges.

Repay high-interest loans early:

Identify the loans that need to be tackled first, such as credit card and personal loans.

To conclude, The tricks are very easy and practical to adopt. I hope the above ideas will help in repaying the loan, smartly and easily. You can also seek help from financial experts to manage your borrowings.

Important links –

https://www.rbi.org.in/Scripts/NotificationUser.aspx

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