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:
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1. Opt for a step-down EMI plan
A step-down EMI plan is offered by several banking and non-banking institutions where the borrower takes a personal loan and repays a big chunk of money that is borrowed with interest in the early years. The EMI gets reduced over time as the principal amount decreases monthly. It is an ideal option for those who are approaching retirement.
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2. Make a partial prepayment
To reduce your EMI burden one can choose to prepay in part. The majority of lenders provide an option to partially prepay a portion of your loan after you have made several EMI repayments. The way it works is that you pay a large sum of money which gets subtracted from your outstanding principal amount. A lower interest rate when the amount of principal that is owed drops will result in lower EMIs. You can pay a certain portion of your borrowed money from your annual bonus or variable pay.
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3. 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.
4. Take advantage of a Personal Loan Top-Up at a cheaper interest rate
You can lower your personal loan EMI by taking out a top-up loan. You can ask your lender for a Top-Up loan on the existing Personal Loan if you have been making on-time payments on your Personal Loan EMIs. Your prompt payments give you the ability to negotiate a lower interest rate while you gain access to more money, a longer repayment term, and in some situations, lower EMIs.
