How To Repay Your Personal Loan Without Burdening Your Income

Personal loans are excellent financial tools to assist you during life’s small and big problems alike. Most people are afraid of taking loans because they fear that it will burden their monthly income.

Applying for the loan is simple enough. What follows next – the loan repayment – makes financial management a little tricky if you have never borrowed a loan before. We suggest 4 ways to repay the loan without burdening your income. You can follow these tips to close the loan faster, too.

#1 Cut unnecessary expenses.

Now that you have a loan to repay, it helps to curb all unnecessary expenditure. Every Rupee you save can help you repay the loan comfortably. On the other hand, expenses put pressure on your income – you have mandatory costs like house maintenance bills, utility payments, children’s education costs, grocery expenses, food and travel costs, etc. Add to these the personal loan EMI for your short term loan. These expenses are non-negotiable and are deducted from your income every month, whatever your income level. Thus, the rest of the income must be saved from unnecessary expense as much as possible so that the household can run smoothly, there is money left over for emergencies, luxury shopping, etc.

#2 Save money every month to pre-pay the loan.

Apart from curbing unnecessary expenses, it is important to save a portion of your income every month. The savings habit is an important one to inculcate – it keeps you safe during emergencies and finances important future events like children’s education or wedding, your own retirement, putting down a payment for a second home, etc. When you have a loan to repay, you ideally should not rely on the EMI cycle alone for the repayment. Instead, you should aim to make periodic payments against the principal borrowing, so that the overall loan burden is reduced and the loan is repaid faster. For example, if you have a monthly EMI of Rs 5,000 against a loan of Rs 70,000. You can aim to save a portion of your income every month and make a larger payment in a certain month. Instead of just the Rs 5,000 EMI amount, you can make an additional payment of Rs 20,000. This reduces the principal borrowing of Rs 70,000 by Rs 20,000. The lender adjusts the EMI to reflect the reduced balance, so your EMI is lower than before. Doing this regularly helps you close the loan faster and save a lot of money on interest payments.

#3 Divert all extra income towards loan repayment.

There are times when some extra money falls into your hands. You could have a part time assignment that pays every few months, or a bonus incentive for doing your job well. Sometimes, visiting relatives also hand over cash gifts. Any extra money you have should instantly be set aside for loan repayment. We have already outlined the benefits of doing this in the previous point. You can set the money aside in your savings account to make a pre-payment against the instant personal loan.

#4 Liquidate an investment that is no longer valuable.

You might have invested in some company shares or mutual funds a while ago. Over time, you realise that they are not appreciating as well as anticipated, or that their growth is stagnating. If the funds have exceeded their cut-off limit, you can redeem them. Ditto for shares that are not performing well, and you can sell them. Divert these monies towards loan repayment to close the short term loan faster.

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