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What is the Best Way to Reduce the Monthly EMI of a Personal Loan

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Though personal loans have high-interest rate, every month instalments (EMIs) can be smartly planned so that the repayment becomes stress-free every month.

As a borrower, you have the flexibility to customize the tenure, interest rate and loan amount using the EMI calculator available on instant loan apps and websites. If the EMI still appears out of your budget, consider ways to reduce your personal loan EMIs.

Best Ways to Reduce the Personal Loan EMI 

Go for a higher down payment- While buying a commodity or a property, paying off a down payment in excess reduces the interest rate and the EMIs as well. Hence, if you have taken a higher loan amount, use a chunk for a high down payment to reduce EMIs.

Choose a loan with a longer repayment tenure- When you opt for a longer loan tenure, the total amount due is divided over a longer duration of the loan period and reduces the EMIs.

Plan the loan amount- EMIs depend on the loan amount borrowed, the best way to minimize is by borrowing a limited amount of money, according to your need.

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Compare Online- With increased competition, many lenders offer attractive interest rates and other discounted schemes to woo the borrowers. The online loan process has made it easier to compare with other competitors and decide the best option for personal loans available at the reduced interest rates and EMIs.

Consider your existing lender- The best way to reduce an EMI is by taking a personal loan with your current lender. It makes sense to avail a personal loan from the same financial institution as a top-up loan. Maintaining years of credibility with the lender enables flexibility in availing the desired EMIs.

Negotiate with the lender- If you are taking a loan from an existing lender, you get the option to negotiate a low-interest rate. The lender can reduce your interest rate based on your credit score and repayment ability.

BeforeAfter

Suppose you took out a personal loan of INR 10,00,000 with an interest rate of 10% per annum for a tenure of 3 Years. Without making any changes to your repayment strategy, your Equated Monthly Installment (EMI) would be calculated using the standard formula for calculating EMI. In this case, the EMI would be approximately INR 32,899.

If you consider above ways to reduce monthly EMI. Assume we take same amount for loan of INR 10,00,000. But you can talk with lender & negotiate the interest rate from 10% to 9% per annum for a tenure of 3 years. With making changes to your repayment strategy, your Equated Monthly Installment (EMI) would be approximately INR 25,000.

How CIBIL Score Helps to Reduce Personal Loan EMI?

Your CIBIL score significantly determines the interest rate you receive on your Personal Loan, affecting your EMIs. A CIBIL score of 750 or above indicates your creditworthiness and financial responsibility. Here's how it can help reduce your Personal Loan EMIs:

1. Lower Interest Rates

Lenders often offer lower interest rates to borrowers with higher CIBIL scores. It means you'll pay less interest over the loan tenure, reducing EMIs.

2. Negotiating Power

A strong CIBIL score gives you negotiating power with lenders. You can request a lower interest rate or favourable loan terms, decreasing your EMI burden.

3. Higher Loan Eligibility

With a good CIBIL score, you may qualify for a higher loan amount. While this doesn't directly reduce EMI, it can help meet your financial needs without increasing the instalment amount.

The Role of Loan EMI Calculator in Reducing Monthly EMIs for Personal Loan

The technological advancement in the software industry created a useful tool like an EMI calculator. Break the myth that is complex to use. It works on the basis of 3 variables – loan amount, percentage of interest and loan tenure. So, borrowers, if you are clear with these three variables, make use of the EMI calculator to derive a suitable EMI. In case, you want to reduce the EMI, flexibly re-enter the new variables and wait for quick results in seconds. EMI calculators beat the manual ways of calculating EMIs that were quite time-consuming and not 100% correct always.

How to Apply for a Personal Loan at Attractive Interest Rate?

Here’s how you can apply for a Personal Loan at competitive interest rates and reduce Personal Loan EMI:

Determine Your Loan Requirement: Determine the reason for taking a Personal Loan and decide on a loan amount. For instance, if you need a loan to fund a foreign vacation, evaluate the costs and apply for a sufficient loan amount.

Visit the Hero FinCorp website: Locate the 'Personal Loan' section and click on 'Apply Now' or a similar button.

Fill in the Application Form: Complete the online application form with accurate information. Be sure to double-check all details before submitting.

KYC Verification: Submit your KYC documents as per the requirements. This typically includes your identity and address proofs.

Loan Approval and Disbursement: Once your application is approved, you will receive an offer letter detailing the loan terms. Please carefully review the terms before you accept. Upon acceptance, the loan amount will be disbursed to your bank account.

Following these steps can significantly improve your chances of obtaining a Personal Loan at an attractive interest rate, helping you save money throughout the loan's duration.

Conclusion 

A multifaceted approach is key when seeking to reduce the monthly EMI of a Personal Loan. Maintain a healthy credit score to secure lower interest rates. Opt for longer loan tenures, decreasing the EMI amount while potentially increasing the overall interest paid. Explore prepayment or part payment options when you have surplus funds to reduce the principal amount and lower EMIs. 

Frequently Asked Questions

1. How much down payment should I pay to reduce my loan EMI?

The significance of the down payment in reducing your loan EMI depends on your lender's policies and loan type. Generally, a substantial down payment reduces the loan amount, resulting in lower EMIs over the repayment term.

2. What are the factors that determine the EMI of a loan?

EMI calculations consider three primary factors: the loan amount, interest rate, and tenure. A higher loan amount or extended tenure generally leads to larger EMIs, while lower interest rates can reduce them.

3. Which kind of interest rate gives a lower EMI - floating or fixed rate of interest?

The choice between floating and fixed interest rates affects your EMI. Initially, floating rates may offer lower EMIs but can fluctuate with market changes. Fixed rates provide a stable EMI throughout the loan tenure, ensuring predictable monthly payments.

4. How can I avoid EMI bounce charges?
To avoid EMI bounce charges, ensure that you have sufficient funds in your account on the EMI due date. Maintain a buffer in your account to cover unexpected deductions or ensure automatic transfers from another account if possible.

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