Managing Finances with an Active Personal Loan
5 min read | 5 months ago
Managing Your Finances While Having An Active Personal Loan
With the advent of easy personal loans, paying for sudden expenses is not difficult anymore. You can easily apply for these loans online to meet varied requirements. These may include home renovations and repairs to gadget/appliance purchases, travel, weddings, and even medical emergencies. Yet you should have a proper strategy to repay the loan and manage your finances effectively. Here is a guide to the same in this article.
Strategies For Funding an At-Home Workout Center
Here are some strategies to help you suitably manage your finances while repaying active easy personal loans.
- Focus on your debt-to-income ratio- This ratio, also known as DTI, is what the bank will see before giving you the loan in the first place. It evaluates your repayment abilities and means the proportion of your income that you spend on debt every month. Even after you get the loan, ensure it does not cross 25-30% to avoid stress.
- Keeping an eye on expenditure- While repaying your loan, make sure that you keep an eye on monthly costs and budgets. Keep writing down your fixed and variable costs while sticking to pre-fixed budgets as much as possible.
- Clear high-interest debts- If you have other high-interest loans and credit card dues, pay them off first. Keep paying your loan EMI on time while clearing off these loans to open up more room for savings and investments.
- Debt consolidation- If you already have sizable personal loans and credit card debts, you can take the consolidation route. You can apply for a single personal loan to pay off all these debts. It may help you get a lower interest rate (and higher savings on monthly EMIs) while managing a single debt that is easier to track and repay.
- Repay your loan without defaults- Avoid penalties or charges for late payments on personal loans, not to mention the negative effect on your credit score. Always have sufficient funds in your account, while paying within the due date every month.
- Put bonuses to good use- Windfalls, surplus money, bonuses, and other extra income can help prepay your loan as much as possible. It will reduce the loan tenure and reduce the total interest cost considerably.
These are some strategies that will stand you in good stead if you wish to manage your finances effectively while repaying an active personal loan. Remember that patience is the key to achieving your financial milestones.
Tips For Managing Stress and Staying On Track With Financial Goals
Stress management is crucial while repaying a personal loan and other debts. It is possible to prioritize repayment and stay on track with your financial goals simultaneously. Here’s how:
- Pay a little more than the minimum amount- Whenever possible, pay a little more than the EMI amount each month. It will help you reduce the principal significantly over time and your total interest cost. We often spend a few thousand rupees here and there without realizing it. - Put this money to good use by repaying your loan instead.
- Maintain the same EMI- Even when you prepay your loan and the monthly EMI comes down, maintain an unchanged EMI amount. It will help you clear your principal amount more quickly in the long run.
- Keep allocating money for investments- While you repay your loan and other debts, use income increases to scale up investments for the future accordingly.
- Monthly budgets matter- Keep looking for ways to save money dynamically every month. Use this extra money to invest or repay your loan, depending on feasibility.
Do not forget to reward yourself now and then for your financial prudence. Remember that you are on the path toward a better future. Stay focused on repaying your debts and scaling up investments for future security.
Conclusion
It is essential to prioritize loan repayment above everything else. While loans can help accomplish various goals, repaying them should always be the goal. Also, keep an eye on your credit score and maintain it by sticking to monthly due dates without defaults.
FAQs
1.Can I use a personal loan for any purpose?
It is possible to use a personal loan for almost any purpose. It may include medical emergencies, travel, higher education, purchasing appliances, etc.
2. What is reducing interest rate calculation?
Personal loans with reducing interest rate calculation have a specific modus operandi. With every EMI payment, the principal also reduces, lowering your total interest accordingly.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
