Finding a solution to a financial crisis or emergency can be a great sigh of relief. A personal loan is indeed a versatile product that helps you fulfill all your immediate needs. Now, it is time for you to do your part-repayment. It is a responsibility and financial commitment to repay the personal loan that you have taken from a financial institution.
While borrowing, you have all plans to repay, but make sure once you get the amount, your plans remain the same. A clear and positive track record of repayment will open your future borrowing prospects and let you borrow at a better rate with a quick approval process.
Not only that, with a smooth repayment history, you will also be eligible for a pre-approved loan. The financial commitment in a personal loan is to avoid defaulting. You must close off the loan within the tenure without any delay or default.
Defaulting means, when a borrower is not able to repay the loan amount within the stipulated time. This shouldn’t happen to you, if you are responsible for repayment. There are various ways in which you can actually work out things in a better way.
Follow these steps when you go for a personal loan apply process to make sure you are not on the defaulters list of your bank or financial institutions.
What lead to the default?
The ideal scenario of borrowing is, after disbursement, starts the EMI payment and the borrower pays back the entire loan amount with the rate of interest within the tenure. However, it is not the case everywhere. There is a chance of being a default when a person is not able to make the payments on time. There is a difference between default and delay. In delay, the borrowers pay the amount but they are late on the due date.
On the other hand, a default means the person is not able to pay no matter what the reason is. Defaulting is a critical scenario, as it damages your credit score and the financial institutions will start recovering the loan amount by any and every means. It is not a scary part, until you make your payments on time and then you are eligible for better financial opportunities.
Ways to avoid defaulting?
Choose the right EMI: An EMI is the monthly installment that a borrower pays to repay the loan. This EMI has a percentage of the principal amount and a rate of interest. Defaulting happens majorly when the EMI amount is more than the capacity of the borrowers to pay. It is the responsibility of a borrower to choose the right EMI that they can manage to pay every month without any delay.
If you are capable of paying a low EMI, go for a long-term loan. Do not delay or default on a loan just because of the urge to quickly finish off the loan, but then not be able to take up the burden of a high EMI amount. Choose the right EMI so that you can pay without defaulting.
Borrow the right amount: The amount you borrow should not exceed your limit or capacity to pay. Make sure you do not borrow a personal loan just because you are eligible for a high amount of money. If you borrow a large amount, the EMI will be huge. You will not be able to manage to pay the EMI monthly. Always remember the amount you borrow will be exceeded by adding up the extra rate of interest.
Prioritize payment: Your EMI payment should be a priority. You can not simply be casual about the payment dates. It should be done by the due date and not after that. If you are not good at dates, make sure you automate your payments. When you automate your payment, you will not miss out on your EMI dates. It will be automatically debited from your account.
Cut down on expenses: If you have taken up a personal loan EMI calculator, you need to make some adjustments. When an EMI is added as a fixed obligation each month, you need to cut down on your expenses. Daily fixed expenses can not be cut down, but the optional and unnecessary ones can wait till you close off your loan. The first priority of your income should be given to your debt and fixed obligations. Stop your expenses that are not essential till you pay off your debt.
Use your savings: If there is an issue with your income, or if there is a sudden emergency that exhausts all your income, you can use your savings to pay off the EMI. You need to do something, but you can not delay or default on the loan. It damages your future borrowing opportunities and also offers you a long-term financial scar.
Finishing up
Always start the personal loan apply process after checking your credit score and planning your finances. An instant personal loan is, no doubt, the best financing solution to meet your immediate needs and expenses. However, if you are borrowing for the first time, make sure you use a personal loan EMI calculator.
