Personal loans offer a great way to meet your financial requirements without the need to pledge collateral. Personal loans can be taken for both salaried individuals and self-employed borrowers which are accessible easily from banks, NBFCs and other financial institutions. A personal loan can be obtained for several reasons, whether for family emergencies or for future studies and more. They also have higher interest rates in comparison to other kind of loans. Hence we all need to save money in some or the other ways and it’s natural to wonder how to reduce EMIs since it’s higher in personal loans.
Here are 5 smart ways suggested by HDFC Bank to reduce your EMI burden on personal loans:
Select a step-down EMI plan
Many banks and non-banking institutions provide step-down EMI plans where a borrower takes out a personal loan and repays a sizable sum of money that was borrowed with interest in the early years. As the main amount lowers on a monthly basis, the EMI gradually decreases. It is the best choice for people who are getting ready to retire.
Prepay In Parts
You can choose to partially prepay your debt to lessen your EMI load. After you have completed many EMI payments, the majority of lenders provide you the option to partially prepay a portion of your loan. It operates by having you make a sizable payment that is deducted from the outstanding principle balance. Lower EMIs are the effect of a lower interest rate when the outstanding principal is reduced. You can use a percentage of your annual bonus or variable pay to pay back some of the borrowed funds.
Consider a Balance Transfer loan
By opting for a Balance Transfer loan, the outstanding loan amount is transferred to a new lender. You can also get a lower interest rate and extended loan repayment tenure which collectively reduce your EMI. If you do decide to use this option, keep in mind that you should also factor in the costs of loan processing fees and loan foreclosure fees in addition to the new lender’s lower interest rate.
Leverage Personal Loan Top-Up at a cheaper interest rate
By obtaining a top-up loan, you can minimise the EMI on your personal loan. If you have been paying your personal loan EMIs on schedule, you can ask your lender for a top-up loan on the current personal loan. You can negotiate a lower interest rate thanks to your timely payments, and you may also be able to have access to additional money, a longer repayment period, and in some cases, lower EMIs.