How to cut down your loan load?
Efficiently cut down on your loan load
Borrowing is now without doubt one of life’s most critical constituents. We’ve all made use of it to tide over the financial crisis we face from time to time. But loans can also prove to be a burden, even when they’re repaid with interest and within a specified time period. However, one can effectively reduce the loan burden by managing properly and live lives which are essentially stress-free.
Go through the write-up and find some of the ways how smartly reduce your loan burden for yourself.
Option for reasonable EMI
When the borrower struggles to repay the monthly EMI then his credit score takes a beating that spoils his record and harms his potential borrowing chances. Hence, it is essential that he opts for reasonable EMI that can be easily repaid. In order to learn about the EMI that you will have to pay on the loan that he is preparing to take, you could request online EMI calculator assistance. This will help the borrower know the EMI that he will have to pay for and if he could afford it.
Increase the amount of repayment with raise in your income
So if your price grows, then you are also needed to increase your monthly EMI amount. Doing this would ensure you complete your loan earlier than that of the specified period and are free to take care of those other valuable things in your life. If one has to clear more than one loan then he will manage to clear the highest interest loan. On the other hand, if you still have current debt from the credit card, you should first clear it.
A Wonderful idea to Refinance Presents
Refinancing or transferring a balance not only reduces interest but also actually reduces the loan burden. It means that one can pay off the existing loan with a new loan that can be acquired from the same or any other lender.
Refinancing can prove helpful in cases where the borrower has an ongoing loan that he has taken full advantage of at interest rates, unfavorable conditions, etc., whereas different lenders offer the same loan at good deals.
To opt for refinancing the borrower will have to apply for a transfer to balance with the new lender who will pay the money immediately to the previous lender who will then close his loan account while activating his new account with the new lender.
If possible then opt for pre-payment or part-payment
Prepaid and part-payment allow the borrower to pay off the amount of the loan as well as the interest before the specified time. Pre-payment of the loan decreases the outstanding principal amount and in turn reduces the EMIs.
On the other hand, times occur when the borrower has any surplus amount. He also will take advantage of this opportunity to pay parts of a home loan. These partial home loan installments bring down the principal amount and the EMIs and interest paid thereon.
Both pre and part payments are reducing the borrower’s big-time financial burden.
However, it is important to clarify whether or not the lender offers the pre-and part-payment facility at the very end.
Existing investments that can also be used to repay debt
Borrowers can use the loan for repaying their debt against investments such as PPF, life insurance policy, etc. Here it would be worth recounting that the PPF permits the investor to take advantage of the investment loan from the third financial year which can then be repaid over the next three years. The maximum amount that can be used as a PPF loan can be up to 25 percent of the balance. The interest paid on borrowing is 2 percent higher than the average interest rate of PPF.
Unless one follows the above points then there can be no shred of doubt that he will be able to repay his loan on time without any hassles, and there will be no debt burden in his life.
Read our articles: