Want to lower your monthly EMI Payments. Here's how!

Dinesh Maheshwari August 27, 2019

With every passing year, the cost of day-to-day living increases steadily as a result of inflation. Aside from day-to-day living costs, there are multiple other expenses such as entertainment or emergency-related expenses that arise.Various loan offers are available in the market to help individual achieve their long-term and short-term financial goals, such as home loans, business loans, education loans, car loans, etc. Let’s discuss few tip and tricks to leverage your borrowing power and lower your EMI cost on future loans.

1. Know your CIBIL score:

You must check your CIBIL score and go through your credit report before approaching a financial institution for getting a loan. If you score is above 700, it means you’re a creditworthy individual who has a good track record of paying EMIs and credit card bills on time.You can use this leverage to negotiate terms and conditions related to the loan and grab a better deal. Checking your CIBIL score beforehand will also let you review and improve your credit score, for minimizing the probability of rejection.

2. Higher down payment

Down payment is the amount you have to pay upfront while applying for the loan. It is always advisable to pay at least 20% of the total amount as a down payment, so as to reduce the loan amount. Since loan EMI and interest rates are calculated according to the principal amount. So, for the lesser loan amount, the interest changes and monthly EMI you will end up paying will reduce significantly.

3. Longer Loan Tenure

Your monthly EMI is inversely proportional to the loan tenure. If you decide to apply for a longer loan tenure, keep in mind that this approach will give you temporary relief. While your monthly EMI installments will be lower, you’ll end up paying more interest on the loan amount. Therefore, you should carefully evaluate pro and cons before taking this approach.

4. Loan Prepayment

Making a pre-payment on your outstanding loan amount can exceptionally reduce your monthly EMI amount. If possible, you can consider foreclosing your loan or make a pre-payment in the first few years. This will reduce the outstanding principal amount and help you renegotiate the loan terms, loan tenure, and interest rates.

5. Loan Transfer

While doing a comparative analysis between loan providers, if you come across a bank or NBFC offering better deals with satisfactory terms, then you can consider transferring your loan. Reach out to your lender and inquire about all the charges related to loan pre-closure and loan transfer. It’s possible that the new lender will charge additional loan processing fees on the transfer. Carefully calculate all the charges involved in transferring a loan from one lender to another, and decide accordingly.

Currently, there are multiple lenders in the market offering loans at different terms and conditions. To leverage your power as an aware borrower and reduce your monthly EMI amount, you can follow the bullet points discussed above to negotiate your loan terms with the lender and grab the best possible deal available in the market on your own terms.

Dinesh Maheshwari

August 27, 2019

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