Opting for a Personal Loan is a significant commitment that requires proper planning and management. While the loan amount helps you meet your financial goals, managing finances with an ongoing Personal Loan can be challenging.
You must ensure you don't miss any EMI payments while keeping your finances in check. Let's discuss some tips on managing finances with an ongoing Personal Loan.
Debt-to-income ratio
When you apply for a Personal Loan, the lender considers your Debt-to-Income (DTI) ratio to determine your creditworthiness. It's the ratio of your monthly debt payments to your monthly income. It's recommended to keep your DTI ratio below 40% to avoid being classified as a high-risk borrower.
A lower DTI ratio indicates you have enough disposable income to repay your debts comfortably.
Financial surveillance
Managing your finances requires proper planning and monitoring. You need to keep track of your income and expenses to determine your financial status. Make a budget and stick to it to ensure you don't overspend. Monitor your credit score, bank statements and credit card bills to avoid discrepancies.
Pay high-interest loans foremost
You can reduce the overall interest you pay on your debts and save money in the long run. Once you've paid off your high-interest loans, you can focus on paying off your loan. If you're struggling to keep up with your loan payments, you may want to consider applying for a Personal Loan online.
Online loan applications are quick and convenient; you can apply for a loan from the comfort of your home. You can also compare different lenders' interest rates and terms to find the best loan for your needs.
When applying for a Personal Loan online, it's important to consider the interest rate. The interest rate is the amount the lender charges for borrowing money and is typically based on your credit score and other factors. A lower interest rate can help you save money on loan payments and reduce your debt burden.
Consolidate your debt
When you consolidate your debts, you essentially take out a new loan to pay off your debts. The new loan typically has a lower interest rate than the combined interest rates of your previous loans, making it easier for you to pay off your debts.
Moreover, consolidating your debts can also offer tax benefits, especially if you have high-interest loans. Personal Loan tax benefits can help you save significantly on your tax liability. You can use a Personal Loan EMI calculator to determine the amount of tax benefits you can avail of by consolidating your debts.
However, it's advisable to consult a tax expert to understand the tax implications of debt consolidation. By consolidating your debts, you can simplify your finances, avail yourself of tax benefits and save money in the long run.
Make prompt reimbursement
Making prompt EMI payments is crucial to avoid late payment fees and penalties. Ensure that you have sufficient funds in your account to pay off your EMIs. Set up automatic payments or reminders to avoid missing any payments. Delayed payments can harm your credit score and affect your ability to obtain credit in the future.
Do not delay
Contact your lender immediately if you face any financial difficulties affecting your ability to make EMI payments. Most lenders offer options such as deferment or forbearance to help you through a financial crisis. Delaying your payments without notifying your lender can result in your default on your loan.
Conclusion
Managing finances with an ongoing Personal Loan can be challenging, but ensuring you don't fall into a debt trap is crucial. Follow these tips to keep your finances in check and make timely EMI payments. With proper planning and management, you can pay off your Personal Loan comfortably.
Axis Bank Personal Loan
Axis Bank offers Personal Loans with a maximum loan amount of ₹40 lakh and a maximum loan tenure of 60 months. The interest rate for the loan starts from 10.49% p.a. and the processing fees can be up to 2% of the loan amount plus GST.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
