While repaying your personal loan EMIs, committing any form of irregularity can have twin consequences. One, the lender levies applicable penalties, and secondly, your credit score takes a hit as well due to failure to pay EMIs on time. Moreover, repeated non-payment of EMIs eventually results in the worst-case scenario of loan default.
Given that it’s common for a sizeable section of individuals to often face similar difficulties in PNB personal loan EMI repayment, it becomes crucial to know the solutions available to avoid defaulting. Explained here are top ways to manage EMIs and avoid defaulting on the personal loan, and safeguarding your financial health:
Redeem fixed income investments not earmarked for crucial financial goals
One of the first & foremost steps that personal loan borrowers can take when facing difficulty in repaying their EMIs is to identify their fixed-income investments in recurring deposits (RD), debt funds or fixed deposits (FD) that are not earmarked for any crucial financial goals. The returns generated by such fixed-income investments are usually lower than the long-term returns generated by other asset classes, especially the equities. Also, the interest earned from such investments generally tends to be much lower in comparison to the interest rate charged on PNB personal loan interest rates and even the lowest-priced loan options amongst lenders. Hence, redeeming your low-yielding fixed-income investments can bail you to in scenarios wherein you are facing difficulty in repaying PNB personal loan EMIs, thereby assisting in avoiding the possibility of loan default.
Request your existing personal loan lender to extend the tenure
Reasons such as a dip in monthly income or a rise in existing loan’s EMI upon arrival of loan reset date, due to a rise in lending rates such as PNB personal loan interest rates, often strain a borrower’s finances, leading to difficulty in repaying the existing EMIs. In such scenarios, the borrower can request the lender to extend the loan tenure since a higher loan tenure would bring down the PNB personal loan EMI amount as well, which might assist the borrower in repaying the reduced EMI amount and thereby avoiding possible loan default. Although stretching the loan tenure would imply a higher interest payout, borrowers can try to prepay the personal loan whenever they have surplus funds in order to reduce the overall interest cost.
Utilize your emergency fund for paying the EMI
Creation and maintenance of an adequate emergency fund amounting to a minimum of six times your monthly recurring and mandatory expenses, including loan EMIs, rent, SIPs etc., is pivotal to tackle financial exigencies. The uncertainty regarding life events such as sudden job loss or severe illness necessitates the need for this fund. Any such unexpected financial emergency can affect a borrower’s repayment capacity, leading to the failure of ongoing EMIs as well. Having an adequate emergency fund would certainly bail you out of such scenarios. Whenever you are finding it difficult to repay loan EMIs due to any financial exigency, consider utilizing your emergency fund towards repayment of the PNB personal loan EMIs, to avoid attracting any late payment fees and possible damage to your credit score as well, due to any form of delay or missed EMI.
Switch your personal loan lender for a lower interest rate
For personal borrowers who are finding it difficult to repay their existing loan’s EMIs, going ahead with the option of switching to another lender via balance transfer is a smart way of reducing their EMI burden. Before finalizing any particular lender, it’s prudent to compare them on various parameters such as PNB personal loan interest rates, tenure, processing fee etc., and then switch onto the lender providing a lower interest rate as well as better loan service terms. Doing so would assist in reducing your PNB personal loan EMI amount, and therefore enable you to pay the decreased EMIs. While going ahead with the decision of balance transfer, note that the new lender is likely to consider your request as a fresh loan application, and therefore may levy some associated charges such as processing fee. Therefore, always make sure that the total saving in interest cost through a balance transfer is substantial, and the levied associated costs do not end up outweighing the balance transfer benefits.
Opt for debt consolidation of loans
Borrowers, especially those serving multiple loans, often tend to face difficulty in repaying their existing PNB personal loan EMIs. During income disruptions or financial exigencies, Even the financial responsibility to timely and regularly repay multiple EMIs at different interest rates and due dates can sometimes pose as a burden to the borrower. Such a category of borrowers can go for the option of debt consolidation, wherein they would be required to repay only one consolidated EMI at lower personal loan interest rates instead of multiple ones at varying rates.
For example, home loan serving borrowers can go for a home loan top-up, as top-up home loan’s interest rates are generally much lower than those of other loan options such as a personal loan. A borrower can utilize the top-up loan’s amount towards prepayment of other loans and just repay the home loan and top-up loan’s EMIs rather than multiple high-cost loan’s EMIs.
Whereas non-home loan borrowers facing difficulty in repaying high-cost loans like personal loans, business loans etc. can consider availing of secured credit facilities like loans against property or gold loans if they possess the required asset. These loans usually involve relatively lower interest rates. Loan proceeds availed from these borrowing options can be utilized to make a prepayment of these existing high-interest cost loans.
Summing it up
More often than not, personal loans act as a gateway in our lives to fulfil various financial goals or mitigate financial shortfalls. And with the gradual emergence of increased access to loans, many people tend to end up simultaneously servicing multiple loans, including personal loans, home loans, car loans etc., either at the same or different time periods of their work-life years. Given that personal loans tend to relatively involve higher interest rates due to their unsecured nature, it becomes imperative to understand and follow the above-mentioned tips to manage the EMI repayments smartly.
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