How To Save On Personal Loans

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How To Save On Personal Loans?

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Personal loansĀ are easy to avail and can be used for any legal purpose, no one can deny the fact that this type of loans are one of the costliest credit product. A borrower has to pay a high interest on personal loans.

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Save On Personal Loans A personal loan is a great tool to finance all the big expenses in life. Personal loans are very easily available and the loan amount can vary in amount, but they are typically smaller than a mortgage. The loan amount of a personal loan generally starts from INR 50,000 and can go up to INR 25, 00,000. So either the need may be a smaller one or a grand one, personal loans are found always handy. Though personal loans are easy to avail and can be used for any legal purpose, no one can deny the fact that this type of loans are one of the costliest credit product. A borrower has to pay a high interest on personal loans.

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Borrow what is really needed: A personal loan is always very tempting as lenders nowadays come up with very attractive offers. It is highly advised not to fall into the trap of offers. Additionally, many people nowadays tend to take a higher amount of loan only because he/she is eligible for that. Applying for a loan amount more than the need will only make the borrower pay much in repayment. So if someone wants to save money on a personal loan that they must be very calculative while selecting the loan amount. Do research on exactly how much is required for any specific purpose and apply for that amount only.

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Keep the Tenure Shorter: Loan tenure has much influence on the total cost of the borrowing. An interest rate on a personal loan is calculated on a compound interest rate. So if the tenure is kept long , a borrower will be paying more in the terms of interest. Let's say, one has taken a loan of INR 50,000 for tenure of 24 months at the interest rate of 11%. So by the end of the tenure, the total amount which the borrower is going to pay to the lender is INR 55,929. Whereas, if the same loan goes for 36 months, the total outgo will be INR 58,930. So as the tenure will increase so the cost of borrowing is suppose to be increased. Keeping a short tenure will come with a higher EMI but it will definitely save a lot by the end of the tenure.

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Debt Consolidation: Debt consolidation is when a borrower takes a new loan to close the existing loan(s). A debt consolidation is a very effective way to save a good amount on personal loans. One can even refinance existing multiple loans with a new loan hence he will be servicing only one EMI rather than many EMIs. Banks and NBFCs offer competitive interest rates on refinancing if an individual has a good credit history. A borrower can switch his loan(s) to a new lender if it is offering an interest rate which is lower than the present one.

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Tax Savings on Personal Loans: This is a rarely known fact that a borrower can save tax on personal loans. A tax exemption on a personal loan can be claimed if the personal loan amount has been used for education purpose or renovation of a home. A tax benefit of up to INR 1,50,000 can be claimed on interest payment of a personal loan if the amount has been used in any of the above two purposes. Prepayment: Prepayment is when a borrower pays the entire outstanding amount before the tenure. A prepayment makes a borrower free from the debt burden long before the predetermined time along with the savings on total outgo. When a borrower goes for a prepayment he/she is sure to save much on interest. However, one may need to pay a prepayment penalty if the loan is at a fixed interest rate.

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Part payment: A part-payment means paying some amount of the total outstanding principal amount. A part payment brings the outstanding principal amount down. Interest of a personal loan is calculated on the principal amount, so a lower principal amount means paying less in interest. This is a very effective way to save on personal loan repayment. One can go for a part payment once they are out of the lock-in period which is generally 12 months for personal loans. Before the 12 EMIs, a prepayment or part-payment is not allowed.

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Getting a loan with the lowest interest rate is not the one and only way to save on personal loans. One can follow the mentioned tips to reduce what he/she will ultimately pay in interest and simultaneously will get out of personal loan debt much ahead of the predetermined time.

Summary: Personal loans are easy to avail and can be used for any legal purpose, no one can deny the fact that this type of loans are one of the costliest credit product. A borrower has to pay a high interest on personal loans. To Apply for Personal loan: https://financebuddha.com/insta-loan/... More info about personal loan: https://financebuddha.com/blog/go-gre... Blog: https://www.buzzfeed.com/amritaagarwal/how-to-save-on-personal-loans-35mpu?utm_term=.cmZeKZ5nX9#.kqxb0JaGLK Facebook :https://www.facebook.com/financebuddha Twitter:https://twitter.com/financebuddha

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