The new mobile phone you have been planning to buy for a long time is finally on sale! Great! But do you have the required funds to purchase it? If not, you can even buy a mobile on EMI. But are you fretting about how to manage loan EMIs with your existing financial expenses?
In this article, we'll discuss eight ways to make your debt management process effective.
8 Smart Ways How to Manage Loan EMI Payments for Gadgets
Budget Your Existing Expenses
If you want to squeeze in a loan for a new gadget, it's important to analyse the existing expenses you are bearing. Since you'll be adding a loan EMI to your monthly expense, you'll need to understand and budget your monthly payments to make space for extra costs. By budgeting, you create a gist of the current expenses and then determine the EMI structure with how much interest rate you can handle each month. This helps you repay the loan on time without falling into a debt trap.
Open a Separate Account to Manage Loan EMIs
Creating a separate savings account dedicated to paying EMIs is a smart way to manage your expenses and ensure you make timely repayments. Use this account only to repay loans and maintain funds in it to make managing loan EMIs easier and more efficient.
Choose Debt Consolidation
If you have more loans to repay, there's a possibility that you may forget or miss a payment, affecting your credit score in the process. In such situations, it's best to take debt consolidation as a way to manage loan EMIs. This process involves combining multiple debts into one, simplifying your debt management and reducing interest rates and monthly payments.
Increase the EMI AmountIf you have taken up a part-time job to earn extra or have recently got a hike in your salary, you can use that amount to pay off your debts as quickly as possible by increasing the EMI amount. Remember, your first goal should be eliminating debt as quickly as possible
Use Investments to Pay Off DebtsA mountain of debt can be hard to bear sometimes. And if you have one heap, it's time to consider other ways than your income to repay debts and manage loan EMIs. One such useful asset is your investment. Liquidating your investments can help you in paying off your debts. You can also take a loan against your investments, like the PPF, and use the money to pay off your existing debts.
Convert Credit Card Bills Into EMIsCredit cards can be a huge source of debt if you don't use them wisely. To lessen the burden, you can sometimes convert them into EMIs. This helps you break down the debt into smaller and more manageable portions and gives you lesser payable interest rates than the traditional repayment route.
Avoid OverborrowingNot only does borrowing above your financial capacity make it difficult to manage your loan EMIs, but it also leads to a higher debt burden and financial strain. If you borrow more than you can comfortably repay, the EMI payments become unmanageable, leading to financial stress and potential default. It can affect your credit score and make it harder for you to attain loans in the future.
If you want to manage loan EMIs for your next gadget purchase effectively, you shouldn't borrow more than what you can repay.
Choose a Longer Tenure LoanWith a longer loan tenure, you get smaller monthly installments, making them more affordable and easier to repay. A longer loan tenure spreads out the repayment period over more months, lowering the monthly EMI amount compared to a loan with a shorter tenure. This can be advantageous for individuals with limited monthly income or those who want to allocate their funds to other expenses or investments. It even reduces your personal loan EMI burden and keeps you away from financial strain.
Use an EMI Calculator to Manage Loan EMI
An EMI calculator is a valuable tool for assessing your loan repayment capacity. It lets you determine the appropriate loan amount you can comfortably repay each month, regardless of fluctuating interest rates and principal amounts.
By incorporating the tips above into your planning, you can effectively manage your loan EMIs. Maintaining a high credit score and making lump sum prepayments can alleviate the loan burden. Additionally, ensuring that your monthly budget remains unaffected by the loan is crucial. It is advisable to establish an emergency fund to handle unexpected expenses.