The golden rule when it comes to taking loans is borrowing only what you can pay. Taking a personal loan is a convenient and quick financing option, but the interest adds up. If you take a top up loan along with it, you should be even more careful about your income and ability to repay. Use a Personal Loan EMI Calculator to get an estimate of your EMIs, and compare this figure against your income. Ideally your EMIs should be less than 40% of your income. In order to not find yourself in a tough spot, there are numerous precautions you can take right from the time you apply for personal loans and top up loans.

Dangers of not taking Precautions when it comes to Repayment of your Loans:

  • You could find yourself deep in debt with towering interest rates
  • Your credit score can fall, making it difficult for you to get loans in the future
  • Your profile could get a bad reputation amongst lenders
  • It could cause legal trouble
  • It leads to stress, tension and health issues
  • It can cause arguments and fights within your family

Tips on Managing your Personal and Top Up Loans

Be wise and pre-pay:

Prepayment involves paying higher sums of money towards the loan account. This helps reduce your tenor and lets you clear the principle amount in lower EMIs. Hence, if you have any form of idle and unused cash it is advisable to use it towards pre-paying the loan.

Choose Loans with Shorter Tenors:

The tenors of loans change from lender to lender and scheme to scheme. For better management of your finances, it is best for you to select a loan with a small tenor. This means you have to pay fewer EMI payments and as a result are free from the stress of repayment sooner. Loans with long tenors can cause you to procrastinate and grow tired of repayment as they feature more EMIs. Over a long term, these EMIs could eat into your income and savings.

Avoid Delayed EMI Payments:

Frequent and timely EMI payments ensure that your principle is repaid faster. However if you delay these, they could pile up over time, forming a huge amount that would be difficult to repay. Also, delaying EMIs could lower your credit score, which is not good for your financial standing, especially when you want to borrow another loan in the future. Hence it is important to understand that the faster you pay your EMIs, the lesser the risk of problems in your future.

Do not over-borrow:

Before going all out to borrow a personal loan or taking another top-up loan, it is important for you to have a clear estimate of how much money you actually need. This could involve viewing your fixed expenses, looking at your monthly spends over the last year or two, taking into account your job security and any possibilities of a raise in the future, etc. Go ahead with borrowing a loan when you have a clear picture as well as a rough estimate of what would be financially prudent for you. Over-borrowing can cause you to pay EMIs for an amount you didn’t need in the first place, which is a serious waste of your money.

View Details and Terms&Conditions Carefully:

Before borrowing a personal or top up loan, perform an in-depth study of the interest rates, monthly EMIs and view and understand the terms and conditions. Only borrow a loan when you are certain that you possess the financial backing needed to pay the EMIs on a timely basis with some amount left over as pre-payment.

With all these tips, you will find yourself repaying your personal and top up loans with ease and using the additional finances to the best advantage.

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