Everyone wants to pay off their loans as fast as they can. But there is a huge difference between “trying” to pay off your loans and being smart about what you are doing. So, that’s what you’ll read in this article today.
Planning the repayment of your personal loan EMIs ahead of time will help you avoid late payment charges and dips in your credit score. It also reduces the stress of organizing finances at the last minute. So, plan a repayment strategy before applying for a salary loan—the first step towards avoiding making the costly mistake of falling into depth more.
Here are some tips you can use to repay your loan with ease.
1. Check Your Repayment Capability
The best way to pay off a loan is to know when you can afford to do it. If you are looking to borrow money, it is important to check if you can afford the payment that comes with it every month. You should also ask yourself how much interest you will have to pay in the long run if you cannot repay your loan in time.
If your monthly repayment amount exceeds your total monthly expenses, it’s best to pay off the loan as soon as possible. The quicker you get rid of the debt; the less interest will be added on in later months and years.
2. Have a Dedicated Account for Repayment of EMIs
The first thing you need to do is set up a dedicated savings account for the purpose of repayment of your loan. This will help you keep track of your payments by making it easy to log in and view.
In addition, it is also important that you have a fixed rate loan, so that you know what the interest rates are going to be in the future. While this may not seem like a big deal, it can really help with planning and budgeting because it ensures that there is no chance of an unexpected hike in interest rates.
3. Keep Track of Deadlines
If you have a lot of loans, it can be easy to forget about them. So, make sure that you keep track of the deadlines for each loan and make sure that you pay them off in full before they reach their date.
If you miss a payment on one of your loans, then that could lead to late fees and interest charges.
So, it’s important to keep track of all of your loans so that there are no surprises when it comes time to pay them off.
4. Choose your Tenure Wisely
It’s easy to get into a loan, but it’s more difficult to get out of one. That’s why it’s important to choose your tenure wisely.
If you can pay off your loans in less than five years, you’ll save money on interest. But if you take longer, the interest will be higher, and your monthly payments will grow. Most loans are repaid over two or three years, but some can be paid back over 10 years. You may want to take out a loan that has the longest repayment period possible in order to reduce interest costs and pay off the loan quicker.
It all depends on what you can afford and how much time you want to spend paying down your debts.
5. Find Ways to Generate New Income Sources
If you are constantly struggling to pay off your loans, it is because you are not generating enough income.
The best way to pay off your loans easily is to find ways to generate new income sources.
For example, if you have a part-time job, try to increase the number of hours that you work. You can work more hours and make more money in less time.
Another thing that you can do is start a side hustle or freelance job that will allow you to generate money even when you are not working full time.
6. Budget Your Expenses
Budgeting is one of the most important things you can do to pay off your loans faster. If you don’t have a budget, you’ll spend more than you have, making it harder to pay off your loans.
If you have a budget, you can see how much money you need to put aside each month and where that money should go.
With a budget, you will know exactly what expenses are coming up and when so that you can plan ahead and get your finances in order.
Once you’ve set a goal, create a budget and stick to it!
Author bio: Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Tanvi writes to-the-point articles on personal finance and budgeting which are truly appreciated by her readers. She is committed to making money matters easy to understand even for the layman. Her commitment to her work doesn’t stop her from pursuing her hobbies of hiking, trekking and going on adventurous trips.