A personal loan is a great financial tool to finance all your vacations, education, any medical emergency or some heavy expenses. While various lenders are offering instant personal loans online, it is necessary that you also have a repayment plan in place to ensure that you do not miss out on your EMIs.
The pandemic situation in 2020 pushed many individuals to opt for an instant personal loan for their daily expenses, who aim to repay the loan in 2021. Let us look at some tips you can follow for timely repayments.
- Plan your loan:Before taking the loan, make sure that you carefully calculate all your expenses, assets, liabilities and any other expenses that you have to incur. Based on the final calculation, plan your loan amount. It will ensure that you do not have unprecedented last-minute expenses and do not have to look for other loan options. Based on your past year expenses, you can get a closer look at your expenses and then decide on your repayment plan.
- Check your tenure: A longer tenure reduces your monthly EMIs, whereas a shorter one will cost you heavily. So while applying for a loan, you can choose the loan repayment tenure wisely and get your loan repayment easily. You can also use the personal loan EMI calculator to get the best loan tenure for your loan amount.
- Cut your expenses: If you have opted for a loan, then it is advisable to cut back on some small and yet unnecessary expenses from your budget. It will help you save some extra money for repayment. Here are a few cuts that can help you save some extra money to pay off your loan balance:
- Skip ordering food online or going out for a dine frequently.
- Cancel the cable expenses and switch to online streaming services.
- Do your home maintenance yourself.
- Exercise on your own and skip paying for the gym.
Boost your income with a side job: If you want to ensure that you pay off the loan as fast as possible, then one option is to continue with your present job and ask for a raise. The other option is to take matters into your hand and boost your income by finding a side job to earn extra bucks. Some of the options for a side gig should include using your skillset and looking for something you will enjoy like:
- Driving for a rideshare company
- Web design
- Offering childcare services when you’re not at your main job
- Online tutoring
- Medical billing
- Delivering groceries (there’s a huge demand for this service right now, and the tips can be generous)
You can also choose to opt for more than a single side gig, but ensure that you do not risk your main job and do not overstress yourself.
Use windfalls to your advantage: Sometimes, we earn some extra bucks through a stimulus check, a tax refund, a performance bonus at work, or a gift from a relative. Instead of wasting this extra cash on shopping, you can use it to repay your loan. If you take that extra cash and apply it to your loan, you’ll get that much closer to knocking out your balance by year-end.
Set the alarm: Due to various other engagements, sometimes we tend to ignore the personal loan EMIs. To avoid such situations, you can set the alarm on your phone or any other digital device for the loan repayment. You can also opt for auto deduction of the EMI from your bank account.
Pay in larger instalments: It is always a better option to pay a larger sum along with EMIs now and then when you have enough money. It will help in reducing your principal amount and thus reducing the EMIs.
Reduce your interest: One of the best ways to reduce your repayment burden is to decrease your interest rate. It can be done by either decreasing the principal amount, discussing with your lender to reduce your interest rate, or refinancing your loan with lower interest rate loans.
These are ways you can ensure that you do not default on the loan and are regular with your EMIs. Based on your loan amount, you can incorporate these tips to become debt free in 2021. A personal loan is not as bad as carrying a balance on a credit card, as the interest rate is lower for a personal loan. Also, a personal loan does not count towards the credit utilisation ratio, which can impact your credit score. But it is always a great option to repay your loan on time to ensure that your credit score is not negatively impacted.