7 smart ways to manage personal loan repayments without stress | Mint

In emergencies, expected needs, or life changing events, a personal loan can be a lifesaver. The real challenge is having a plan to track repayments efficiently and on time, after you receive your money. Poor personal loan management can lead to financial stress accumulation, credit score drops, and growing debt.

Here are some easy to implement strategies, backed by experts, that can help you manage your loan payments, and have a payment experience with more peace of mind.

Key tips to handle personal loan repayment in right way

1. Understand your repayment schedule

Before you move forward; make sure you understand the detailed structure of your EMI. Know your:

• Duration/period, due date, and EMI amount/obligation
• Total interest outstanding

Sticking to using the online loan tracker or EMI calculator from your lender will help to avoid surprises and best prepare for your budget each month.

2. Prioritise your EMI in your budget

Similar to rent or utilities, your EMI is a monthly expense that cannot be avoided. Set aside your EMI before allowing yourself to spend anywhere else for discretionary purchases that include eating out or buying something.

(Pro tip: Use a budgeting planner, or personal finance applications to track your income vs expenses. This can help you to avoid unplanned purchases and direct dollars towards paying off debt, rather than unnecessary spending.)

3. Opt for auto-debit facility

By establishing a debit authority with your bank, you can ensure that EMIs are paid on time every month without the necessity for any human intervention. Not only will this protect your credit history, but it will also eliminate late fees.

4. Consider part or pre-payment

If you happen to receive a windfall, consider using a percentage of it to make a partial payment. This will decrease your overall interest burden by decreasing your outstanding principle. Alternatively, you can consider full prepayment after careful consideration of any potential prepayment charges if your loan terms permit this.

5. Avoid taking multiple loans

While personal loans are available and unsecured, borrowing more money than you can afford could significantly impact your budget. Too many outstanding loans may push you into debt and limit your future borrowing capacity. Always approach alternative credit options one loan at a time and repay them before exploring other possibilities.

6. Refinance if interest drops

Keep in mind refinancing your personal loan may make sense if market interest rates significantly lower or your individual credit profile has improved. Think about transferring your credit worthiness to another lender with better terms to pay down the remaining balance of your loan.

7. Regularly monitor your credit score

Paying on time improves your credit score which makes you eligible for loans in the future and to borrow money. Make sure your lender reports EMIs accurately, and monitor your credit report. This will help you track your financial growth and can also alert you to fraud or mistakes.

In conclusion, if you plan and are diligent with your payments, a personal loan can be a stress free experience. If you are disciplined with your budget, make timely payments, and borrow wisely, you will manage your loan repayment and likely even repay early and save on interest.

Disclaimer:Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.