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5 ways to
cut EMI cost
The cost of living each year has increased
tremendously. What we might have got for Rs.5 two years ago might be costing
Rs.20 now. It has become necessary to know the art of managing your finances to
meet your monthly or yearly financial goals. All this we need to manage with
other important expenses or investments you might have done to safeguard your
future.
With the prices of commodities very high
taking loans be it personal loans, home loans, auto loans etc. has become
second nature to this generation. The EMI due to these loans are one of the
most substantial expenses each month that a person must dish out.
With loans and EMI playing such a big part
in a person’s life and budget we decided to give tips that will help reduce the
cost of your EMI for any loan.
1.
Check your credit score: Before you even
think of going for a loan it is best to check
your credit score and credit report. If you have a good credit score (750
and above) then you have paid all your dues on time and are an ideal customer
for the bank. This gives you the upper hand in any negotiations to get a better
deal on your loan.
On the other hand, checking your credit score helps to
rectify any negative points on your report as a bad credit score is grounds for
loan rejection.
2.
Negotiate with the bank: If you are in
good standing with your bank who knows about all your salary details and
expenses then you can negotiate good terms for your loan.
Also, the same can be applied for existing lenders or
previous lenders where you have paid your dues on time show casing that you are
very disciplined when it comes to financial matters, you can negotiate a better
deal with them.
3.
Opt for a longer tenure: If you have a
long loan period, your EMI reduces proportionately as your principal and
interest is divided over a greater number of months. However, while the actual
monthly outflow will be smaller, you will be paying out EMIs for a longer
period and paying interest for a longer period. So, while your monthly burden
might be smaller, you might end up paying more over the entire duration of the
loan.
4.
Making an early prepayment: One way to
significantly reduce your EMI for the majority of your tenure is to make an
early pre-payment. If you are able to afford the option of prepaying part of
your loan, it is better to do it in the early months/years of the tenure so
that your principal decreases, thereby saving you interest on later payments.
5.
Transfer you loan to another lender: If
you find a lender who offers better terms and conditions on your loan, it might
be a good option to change your lender.
However, it is important to calculate the costs involved in prepaying
your loan with your existing lender and to ensure that the costs are not
greater than the savings you will gain with your new lender.