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Vipasha Pillai - August 20, 2024
In case you ever need to take a loan for a medical emergency in your family, it’s important to be sure about certain things before applying for a loan. Once you take a loan, managing your EMIs is crucial to maintaining financial stability. There are some common mistakes people make with their EMIs that further leads to financial stress. Here are four such EMI mistakes you should avoid…
1. Choosing Longer Loan Tenures
You may think it’s a great idea to opt for a longer EMI tenure so that way you’re under less pressure. While longer loan tenures might seem appealing, the fact is they increase the total interest you pay over time. Essentially, you’ll end up paying more. Instead, choose a loan tenure that balances affordable monthly payments with a reasonable overall cost. While it may mean slightly higher EMIs, you’ll save on interest in the long run.
2. Late Payment
Paying your EMIs after the due date means paying extra charges, which increases the overall cost of your loan. Additionally, late payments can negatively affect your credit score, making it harder to get loans in the future. The best thing to do is set up automatic payments from your bank account to ensure you never miss a due date. If not, you can set a reminder on your phone or on the DRiefcase app a few days before the due date.
3. Borrowing More Than You Need
Applying for a loan amount that exceeds your requirement will only increase your debt burden and the total interest you’ll pay. It also means higher monthly EMIs, which can ruin your budget. Carefully assess how much you truly need before applying for a loan. Stick to that amount to avoid unnecessary financial strain.
4. Ignoring Prepaying Options
Most people ignore the option to prepay their loan when they have extra money from a bonus or a tax refund. Prepaying reduces the principal amount, which in turn lowers the interest you pay and can help you close the loan sooner. We suggest, whenever possible, make additional payments toward your loan. Even small prepayments can make a big difference in the total interest you pay and shorten your loan tenure.
Managing your EMIs wisely is important to maintain financial health. By avoiding late payments, choosing a reasonable loan tenure, borrowing only as much as you need and taking advantage of prepayment options, you can keep your loan costs under control and stay on top of your finances.