Those individuals who have availed a loan do know the burden of repaying the loan amount. With the growing inflation rates and shrining earnings, it is not easy to garner more savings. The rising rates of goods and services have shrunk the savings of most of the household. Apart from meeting out our monthly expenses, one has to keep a certain part of their monthly earnings as an investment for securing their future making the scenario even tight.
Hence if you are planning for purchasing big budget assets, be it a two-wheeler or a four-wheeler or even a house, it is better to take a loan making a detailed analysis. One should always keep in mind that loan acts as an added expense in addition to the existing set of expenses in your life.
Do check the interest rates offered by several banks and the one with higher interest rates will make your repayment amount costlier as the EMI will go up instantly with a loan with carries higher interest rates and vice versa.
The following are the List of Easy Ways to Reduce Equated Monthly Installments (EMI) on loan.
Full or Part Payment of Loan
Making full or part payment of the loan will reduce the cost of the loan. If in case, you have received a lump sum amount of money in the form of bonus from your salary or by selling another property, do utilize this money wisely by making part payment. By doing so, your total outstanding loan amount will come down, so is the EMI.
A full repayment will help the borrower to completely get rid of the burden of the loan whereas the part pre-payment will reduce a chunk of the principal amount of loan as well as the tenure of the loan, thus reducing the interest amount paid on the loan amount.
Go for Higher Down Payment
The term down payment refers to the amount paid by the customer upfront to the seller at the time of purchase of an asset. As the entire purchase price of the said asset is borne by the customer, the higher down payment will leave the customer to borrow lesser loan amount.
The interest on the loan amount will be calculated based on the principal amount borrowed by the customer. Higher the loan amount higher will be the interest and EMI. It is better to make a large amount as a down payment as this will not only reduce your equated monthly instalments, but it will help you to save a lot of money in long - run.
Pick a Loan which has Longer Repayment Period
Longer the tenure for repayment, lesser will be the EMI amount and hence it is a better decision to go for a loan with longer repayment period. By choosing a long-term repayment tenure, the total amount due is disbursed over a long period which in turn will bring down the repayment amount in the equated monthly instalments.
But the only drawback of long-term repayment is the borrower will be charged an interest rate on the outstanding debt amount for an extended period. Though the longer loan period will reduce the EMIs, it will translate a big amount of interest over the complete loan tenure. Hence one should evaluate carefully before extending their loan tenure and weigh all the pros and cons before choosing for an extension.
Mediate with Bank for Lower Interest Rate
If you are an existing customer of a bank and require a loan it is better to mediate with your bank, if you have a good track record. Most of the banks are willing to provide attractive interest rates on loans to their existing customers as this will increase their brand loyalty.