Managing Your Personal Loan EMI

Personal loans are high-interest unsecured debts that can quickly become a burden if not managed correctly. Here is how you can stay on top of your EMIs.

Understand the Interest Calculation

Most personal loans use a reducing balance method. Understanding how your monthly payment is split between principal and interest can help you decide when to make prepayments.

Automate Your Payments

Missed payments lead to hefty penalties and a drop in your credit score. Use Electronic Clearing Service (ECS) or Standing Instructions (SI) to automate your EMI deductions from your bank account.

Avoid Multiple Loans

Taking multiple personal loans can lead to a debt trap. Consolidate your debts if possible into a single loan with a lower interest rate to simplify your monthly outgoings.

Maintain a Buffer

Always keep at least two months' worth of EMIs in a separate emergency fund. This ensures that even in case of an unexpected financial crunch, your loan repayments continue smoothly.

Monitor Your Credit Score

Regularly check your credit score. A good score might allow you to refinance your high-interest personal loan with a cheaper option later on.

Need to calculate your monthly outgoings? Try our EMI Calculator.