There’s no doubt that loans and other similar such credit avenues are immensely convenient. They let us explore options that otherwise might not have been possible and, in many cases, they’re lifesavers. Nowadays, you can even get online loans at the click of a button.
However, there’s also the part where the loans need to be repaid with interest. After you’ve reaped the benefits of the loan, you have to set about the process of repayment. And just as when you got those personal loans online in the event of a cash shortage, you could be faced with similar shortcomings during the phase of their repayment. After all, life can be unpredictable, as we all know by now.
That said, there are ways to offset your loan repayment without having to dig too deep into your precious savings or emergency fund. Here’s how:
Take advantage of tax benefits: You can take advantage of loans that offer tax benefits, such as when you take a home loan or an educational loan. Before you go ahead with prepaying some of your loans, be sure to ascertain your cost benefits by doing a post-tax calculation. It might not always be worth your while to hold on to the loans which carry tax benefits.
Make timely use of your one-time or bonus receipts: When it comes to prepaying your home loans, you could assign some of your one-time receipts from other sources. Not only that, but you could also use them to pay off your credit card debt or personal loans which bear high interest.
Increasing your EMIs: As a rule of thumb, your equated monthly instalments (EMI) should increase proportionately as your income increases. However, with the administrative process involved with changing your EMI, it might not always be feasible to do so. But at least try to do it every two years or so and you’ll surely enjoy some benefits.
Prepay using savings: One of the healthier ways to prepay is to put an amount of money every month in a savings plan such as a recurring deposit or debt mutual funds and upon their maturity, you could put it towards prepaying your outstanding bank loans. The reason this is healthy for your financial well-being is it tends to inculcate in you a tendency for saving and also, you don’t end up having to pay a sizable portion of the amount at one go.
Make a budget and stick to it: As we’ve discussed previously, a budget is one of the most beneficial tools for keeping your finances in order. Sure, you may be eligible for a loan based on your income. However, what you do with that sum is up to you. Having a well thought out budget will prevent you from going for a heavy loan for a home or vehicle at a time when you could already be juggling some high-interest loans. After all, life can be unpredictable and a budget will help ensure you don’t overstep a line that could force you to dip into your emergency funding.
Look at refinancing options: Many loans offer refinancing options. It entails paying off the existing loan with a new one. It can be paid by the same lender or another. Look at this option only in cases where you’ve had to borrow at an extremely high personal loan interest rate or those where the tenures are too long. During refinancing, you could change the interest rate, tenure, or both. That said, it involves some charges.
While these are some strategies that could help you reduce your loan burden, you will have to bear in mind that regular EMI payments will have to be made no matter what. Only then can you keep up a good credit score.
At mPokket, we offer highly convenient repayment options as well as incentives for timely payments. After all, our purpose is to provide financial independence to youth. So, if you’re in need of some quick credit, don’t hesitate. Simply download the mPokket online loan app. Register by uploading a handful of documents, and post-approval, borrow instant online loans of up to Rs. 30,000! mPokket instant student loans and salaried loans are both credited straight to your bank or Paytm account within 10 minutes.
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