Personal loans are a popular option for people who need quick access to funds for various purposes, such as debt consolidation, home renovation, or medical emergencies. However, when you take out a personal loan, you also commit to repaying the borrowed amount in equated monthly installments (EMIs) over a predetermined period.
Missing an EMI payment can have several consequences, such as damaging your credit score, incurring late payment fees, and attracting legal action from the lender.
In this blog, we’ll discuss some major steps that you can follow to avoid missing your personal loan EMI.
How To Avoid Missing Personal Loan EMI?
1. Plan your budget
Before taking out a personal loan, it’s essential to assess your financial situation and plan your budget accordingly. You should calculate your monthly income, expenses, and debt obligations to determine how much you can afford to pay towards your loan EMI. It’s recommended to keep your EMI payments below 40% of your monthly income to ensure that you have enough money for other essential expenses.
2. Set up auto-debit facility
Most lending institutions offer an auto-debit facility that allows you to automate your EMI payments. By setting up this facility, your EMI amount will be automatically deducted from your bank account on the due date. This way, you don’t have to remember the payment date or risk missing a payment. Make sure that you have sufficient funds in your account to avoid bouncing of the EMI payment.
3. Opt for a suitable repayment tenure
While taking out a personal loan, you can choose a repayment tenure ranging from 1-5 years. It’s essential to select a suitable tenure that aligns
with your financial goals and EMI affordability. If you opt for a longer tenure, your EMI amount will be lower, but you’ll end up paying more interest in the long run. On the other hand, if you choose a shorter tenure, your EMI amount will be higher, but you’ll save on interest payments.
4. Maintain a good credit score
Your credit score is a crucial factor that lenders consider while approving your personal loan application and determining your interest rate. It’s essential to maintain a good credit score of 750 or above to improve your chances of getting a loan at a lower interest rate. By paying your EMI on time and keeping your credit utilization low, you can improve your credit score and avoid missing your EMI payments.
5. Prioritize your EMI payments
If you have multiple debt obligations, such as credit card bills, car loans, or home loans, it’s essential to prioritize your EMI payments. Your personal loan EMI should be given the highest priority as missing a payment can have severe consequences. You can automate your other debt payments as well to avoid missing any payments.
Conclusion
In conclusion, missing your personal loan EMI can have significant financial implications, such as damaging your credit score and attracting legal action. By following the above steps, you can avoid missing your EMI payments and ensure that you repay your loan on time. Always remember to plan your budget, set up auto-debit facility, opt for a suitable repayment tenure, maintain a good credit score, and prioritize your EMI payments.
