03 October, 2024 | 17:00 IST
A personal loan could be useful for a range of financial needs like home improvements, a significant purchase or a vacation. With the mushrooming digital lending platforms it has become quite convenient to avail personal loans. However, there lies a big responsibility on the part of the borrowers— the utilisation of loan amount.
When used wisely, a personal loan can alleviate financial stress and help you achieve your goals. It needs effective personal loan management, which could be a daunting task, especially if you are new to borrowing.
To help you navigate the crucial aspects of personal loan management, let’s take a look at a few strategies. By implementing these strategies, you can take control of your financial situation, ensuring both a comfortable present and a secure future.
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Before diving into personal loan management, you need to understand the terms and conditions of your loan. It’s important to check all details of personal loan offers before borrowing the amount. You can easily access many loan offers on digital platforms like Moneycontrol, which provides instant loans up to Rs 15 lakhs in partnership with four lenders. The interest rates start at 12% per annum.
Familiarising yourself with the personal loan repayment schedule, interest rate and tenure is essential. Understanding these allows you to estimate your personal loan repayment amount and the total cost of the loan.
Effective personal loan management starts with developing a reasonable budget or a repayment plan. Make a list of all your monthly costs and income streams. Set aside a particular amount of your salary to repay your loans. Use apps or a budgeting software to monitor your expenses and make sure you have enough money to pay your EMI (Equated Monthly Instalment). You can better handle your personal loan management and prevent late payments by sticking to a budget. Make sure that your loan repayment stays a priority by reviewing and adjusting your budget on a regular basis.
Prioritising your personal loan repayment is crucial for maintaining a good credit score and avoiding penalties. Set up automatic payments through your bank to ensure your EMI is paid on time. This can prevent missed payments and help you avoid late fees. Timely payments also contribute positively to your credit history, which can be beneficial for securing future loans at better rates.
Your credit score plays a significant role in your personal loan management. You may be able to get better loan terms if your credit score is higher. Regularly check your credit score to report any discrepancies, which would help you to maintain a healthy credit report. You can check your credit score for free on the Moneycontrol app and website. A good credit score not only helps in managing current loans but also positions you favourably for future credit opportunities.
ALSO READ: Personal loan impact on credit score: Key factors and tips to manage
If you are juggling multiple loans, a debt consolidation loan can be a practical solution. This involves combining several debts into one loan with a lower interest rate, simplifying your personal loan repayment process and potentially reducing your monthly payments. A debt consolidation loan can also streamline your financial management by reducing the number of payments you need to track and handle.
Understanding and managing fees associated with your personal loan is crucial. Be aware of any prepayment or foreclosure charges that might apply if you decide to go for an early personal loan repayment. Evaluating the loan fees and charges along with the EMIs helps you to ensure a hassle-free payment without loan defaults. This information allows you to make informed decisions about whether to prepay or refinance your loan and helps you avoid unexpected financial burdens.
Maintaining proper communication with your lender is vital, especially if you are facing difficulties in your personal loan repayment. Many lenders are willing to offer temporary relief or restructure your loan terms if you are facing loan repayment hardships. Inform your lender as soon as you foresee any issues with your personal loan repayment schedule, and explore options such as extended tenure to ease the financial burden.
Effective personal loan management requires a long-term approach. Plan your finances with your loan repayment in mind and avoid taking on additional debt that could strain your budget. Consider setting up an emergency fund to cover unexpected expenses and prevent the need for further borrowing. An emergency fund provides a financial cushion, reducing the risk of falling behind on your loan payments in case of unforeseen circumstances.
Making optimum use of financial tools and resources can significantly help you in personal loan management. Digital platforms like Moneycontrol allow users to track and evaluate personal loan offers easily. Use the online calculators to estimate your EMI, total loan cost and the impact of prepayments.
It’s important to understand your loan terms, set up a budget and prioritise timely personal loan repayment. It could be a prudent decision to avail personal loans only when you are in a dire need of money. Responsible utilisation of borrowings and a well-planned repayment strategy helps to avoid financial burdens in future.
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