Personal loans can be quite helpful when you need them but having to pay them back with Equated Monthly Installments (EMIs) may at times be too much to bear, particularly if the EMIs are large compared to your monthly income. High interest rates can put a strain on your finances, making it harder to achieve other financial commitments and objectives.
This could make you feel stressed out financially and make it difficult for you to save or invest for the future. This burden can be greatly reduced by lowering your loan EMI, giving your monthly budget more flexibility.
This guide provides strategies to help you lower your loan EMI effectively, empowering you to manage your loan repayments more effectively and enhance your overall financial health.
(Disclaimer: While this information provides a general overview of strategies for potentially reducing your loan EMI, it’s not a substitute for professional guidance. We strongly recommend consulting a financial advisor before taking out a loan or making any decisions about your existing loans.)
What is EMI (Equal Monthly Instalment)?
It’s important to know what your EMI is before looking into techniques to lower it. An equal monthly installment (EMI) is a set amount that a borrower pays to a lender on a predetermined date on decided months. It is computed using the loan amount, interest rate, and duration to determine both the principal and interest component.
Strategies to Reduce Personal Loan EMI
1. Opting for a Longer Tenure:
One simple option to lower your monthly Equated Monthly Installment (EMI) is to extend the loan tenure. This will lower the monthly principal amount by spreading out the repayment over a longer time. Lower monthly payments simplify budget management and free up cash flow for additional spending or investments. However, because the principle falls more slowly with this technique, the interest collected over the course of the loan will be larger, meaning you will ultimately pay more interest.
2. A Lower Interest Rate Negotiation:
Your EMI and total interest burden might be considerably reduced by negotiating for a lower interest rate. By lowering the interest portion of your monthly installment, a lower interest rate immediately results in a lower EMI. Use your strong repayment history and high credit score to your advantage to do this, as lenders will typically give low-risk borrowers better terms. To bolster your argument, provide a solid financial background with a consistent income and a low debt-to-income ratio. Utilize internet tools to regularly evaluate interest rates offered by several lenders. If one lender offers a rate that is lower than the other, consider balance transfer options.
3. Consolidating Loans into One:
You can successfully cut your total interest rate by consolidating several loans into a single loan, particularly if the combined loan has a lower interest rate than the individual loans. By consolidating multiple monthly payments into one, this approach reduces the complexity and chance of missing payments, therefore simplifying payback management. Assessing your current loans—including their outstanding amounts, interest rates, and periods—is the first step in the consolidation process. Next, look up to financial organizations that provide consolidation loans with advantageous terms. Compare the new EMI to the total of your existing EMIs to determine possible savings, accounting for consolidation expenses. After being accepted, the consolidation loan’s proceeds are applied to the balances owed on other loans, leaving the new lender with just one monthly payment.
4. Seasonal Offers and Discounts:
Often, during holidays or promotional periods, financial institutions may launch special deals and discounts. This is a great chance for borrowers to get better loan terms and lower monthly installment payments. Variable tenure choices, no processing fees, and lower loan rates are common features of these deals.
For example –
- Banks may drop interest rates on loans during holidays such as Diwali, which will translate into a monthly EMI reduction since the interest component is reduced.
- Promotional periods can also offer lowered or waived processing fees, which would drastically lower the upfront cost of borrowing.
- While discounted insurance and cashback are examples of packaged offerings that might save you more money.
In summary, you can effectively reduce personal loan EMI by exploring these strategies: negotiating circumstances, selecting the appropriate loan products, and taking advantage of seasonal offers. This proactive strategy helps you save and invest more, which improves your long-term financial well-being alongside easing your monthly financial commitments.
Also Read:
Learn about What is EMI and No Cost EMI?
