Personal loans are a saviour when it comes to financial emergencies like travel bookings, wedding expenses, medical expenses, festival expenses, etc. Some of the best features of acquiring personal loans are that they come with a non-restricted use and are unsecured (no collateral required) in nature. Several financial institutions offer personal loans at lucrative interest rates.
When repaying your personal loan, you need to pay a monthly EMI (Equated Monthly Instalment), which comprises a percentage of the Principal loan amount and interest component that you owe to the loan provider. You can use a personal loan EMI calculator that can help you assess the most suitable EMI for a personal loan based on the loan amount, tenure, and interest rate.
However, there are several EMI options to choose from when repaying your personal loan. Here is a comprehensive guide on these options so that you can decide the best one according to your requirements.
How Much EMI do you Need to Pay?
Your personal loan EMI is the monthly amount you pay for repaying the loan, comprising the principal loan amount and the interest component. You must apply various combinations and permutations using a calculator based on the EMI amount that you can easily pay off, considering your monthly income, loan tenure, and various providers’ interest rates.
Based on the availability of the best personal loan options, you can choose how much EMI you can easily afford to pay regularly:
1. Interest: You must compare various interest rates to calculate the right EMI option.
2. Loan Amount: If you want to reduce the EMI amount, you can do so by reducing your loan amount.
3. Loan Tenure: If you have good financial backing, you can go for a short personal loan term. This gives you the benefit of paying lower interest charges but comes with a high EMI amount. On the contrary, if you want to reduce the EMI amount, you can opt for a longer tenure. Paying off your personal loan EMI as quickly as possible is recommended if you are financially stable.
4. Monthly Budget: Depending on your monthly income and financial responsibilities, choose your EMI so that it does not become a stress for you.
Different EMI Options
Here are different EMI for personal loan options that you can consider when repaying your personal loan:
Standard EMI Plan
This is the standard plan that all personal loan providers generally offer. You need to pay a set EMI for a fixed number of years, comprising the repayment of interest and principal loan amounts. Under this category, the EMI amount remains unchanged for the entire loan tenure. Thus, this is an ideal plan if you don’t expect any major fluctuations in your monthly income.
Flexi Personal Loan EMI Plan
A Flexi Personal Loan means that you have the liberty to pay it off in full or partially when you have the funds available. This personal loan helps you manage your loan and income effectively and is best suited if you have multiple sources of income or a chance to have an income appraisal at any point in time.
Flexi Personal Loan EMI Plan offers great variation and flexibility. When you start repaying your personal loan, you can choose a lower EMI amount in the beginning, and as your income increases, you can eventually pay a higher EMI. This can help you manage your personal loan EMIs according to your income-earning capabilities.
EMI in Advance
This feature allows you to pay the EMI in advance. You can opt for paying the first few EMIs in advance, along with the stipulated fees of acquiring a personal loan. Again, the EMI consists of important components like interest amount and principal amount.
If you have available funds to mitigate the loan burden for any specific month, you can either opt for full repayment, partial repayment of the personal loan or pay off EMIs in advance. This will help you reduce the amount payable component and reduce your debt, especially interest payable towards personal loans.
Conclusion
Choosing the right kind of EMI for personal loans according to your needs and monthly budget is crucial. Paying your EMIs on time and having a good repayment capacity directly impact your credibility and credit rating. Making timely payments and not missing any EMIs help you increase your rating and save you from expensive penalties and fees.