Handling multiple EMIs every month can become a quite daunting task without even realizing it — especially when you are trying to manage credit card bills, existing loans, and daily expenses. It not only drains your budget significantly but also creates the possibility of a missed payment that can lead to a lower credit score as well.
Most of the borrowers who are in tricky circumstances decide to use a personal loan to manage their money better. If this method is employed sensibly, it can be an effective way to combine all your instalments into one monthly EMI. Regardless of whether you want to apply through a bank or a loan app, it is quite necessary to find the right approach to solve the problem.
Understanding the Problem With Multiple EMIs
For example, one can have a car loan, a credit card balance, and a consumer good loan and each will have a different interest rate, due date, and lender. The result is a scattered repayment structure, making it harder to track and plan finances.
Besides the mental strain, the late or missed payments also lead to late fees and negatively affect your credit report.
How a Personal Loan Can Help Consolidate EMIs
Consolidating the existing debt with a personal loan is basically taking one loan in place of multiple loans with varying sets of debt. That’s to say you take a certain sum of money to clear all the loans and then that one you go on repaying with installments. The biggest benefit of this approach is simplification — one EMI, one interest rate, and one due date.
In case you choose to apply online via a loan app, the entire process could be completed within a short time and with minimum paperwork.
Benefits of Consolidating EMIs
1. Single Due Date
Having only one EMI means that the chance of forgetting the due date is quite low. In addition, it saves you from paying a penalty and protects your credit score.
2. Potential Interest Savings
If your current debts mostly consist of credit cards, which typically have high-interest rates, a personal loan with a lower interest rate can help you lower the total amount you need to repay.
3. Fixed Repayment Schedule
In contrast to revolving credit where the amount can grow continually, a personal loan comes with a set time and EMI. Hence, you can plan the period until you become debt-free with no room for surprises.
4. Better Budgeting
A single EMI lets you budget more precisely. You will be sure about the amount of money going out each month thus enabling you to adjust your other expenses accordingly.
Things to Consider Before Consolidating
- Assess the Total Outstanding Debt – First of all, make an inventory of all your current loans, their interest rates, the period left, and the total outstanding amounts.
- Check the Interest Rate on the Personal Loan – Confirm that the new personal loan offers a competitive rate. If the interest rate is higher than the average of your current loans, consolidation may not be beneficial.
- Factor in Prepayment Charges – Some loans you have can be charged if you pay them off earlier than the agreed period. These charges have to be added to the money you save from consolidating in order to get the true picture of the amount saved.
- Don’t Accumulate More Debt – Once you have consolidated, there might be the temptation to make use of the credit limits you have and spend more money. Don’t be lured into this trap.
How to Manage Your Loan Efficiently
- Set EMI Reminders or Auto-Debit: One loan is definitely an easier one. Besides, an auto-debit from your account is also guaranteed. Thus, you will never have to worry about missing the payment at any point of time.
- Use EMI Calculators Before You Apply: Calculate how much EMI suits your income. Most loan app platforms offer built-in EMI calculators to help you plan before applying.
- Choose a Realistic Tenure: Shorter tenures mean higher EMIs but lower total interest. Longer tenures ease your monthly burden but cost more in the long run. Choose based on your current financial comfort, not just to reduce EMI.
- Review and Refinance Periodically: When interest rates drop or your credit score goes up, look for refinancing options to get a lower-interest personal loan and save more.
Conclusion
Handling multiple EMIs, financial and mental, are really challenging. The individual loan that is taken for consolidation gives a definite way to manage the debt, improve the repayment discipline as well as possibly reduce the interest cost. If used prudently, either through a lender or a loan app, it can definitely make your financial life simpler and give more clarity to your budget. The most important things are to repay regularly, plan carefully, and do not borrow again until you have totally paid off your current debt.