Personal consumption is one of the most powerful drivers of the economy in modern India and none is willing to patiently wait to accumulate savings to acquire that dream gadget or go on the vacation of one’s dreams. Applying for a personal loan from ever-eager banks is the easiest way out.
They are fast, need very few documents and no collateral assets to back up the cash they give you. There is also no restriction on the end use of the funds. However, lending institutions charge higher interest rates to cover them for the additional risk they undertake in these loans. That means significant EMIs can erode your monthly cash flow. The moot question, therefore, is how to reduce EMIs on personal loans.
Personal Loans interest rates
Never rush to the first bank that comes to your mind to take a personal loan. The interest rate band for personal loans vary from bank to bank. For example, for general corporate employees, SBI, the biggest public sector bank in India, usually charges rates between 12.5% and 14.5%. On the other hand, HDFC Bank, the largest private sector bank, charges 10.75% to 24%. Therefore, any prospective loanee should find out the rate of interest from several banks to find out a low EMI.
Step-down EMI plan
A step-down EMI plan helps to reduce the EMI amount progressively every year. Typically, a bigger part of the principal amount is paid in the early years of the repayment. As a result, as the years progress, the EMIs reduce. If the loanee is close to his/her retirement, this model specially suits them.
Part payment
Paying off part of the loan out of turn is an effective way of drastically reducing EMI. If you come to get any lump sum – bonus or variable payout from your company or some other payment maturing – it would be prudent to make part-payment.
Balance transfer
Balance transfer is the way to shift the outstanding loan amount to a new bank or lending institution. It is helpful if the new lender offers a lower interest rate compared to your existing lender.
Personal Loan EMI: A personal loan is the most tantalising option for prompt gratification of one’s desires. But it also burdens one with a high EMI. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
