With the end of the month approaching, it is common if your funds get dried up. People usually make a budget to keep track of their spending and enroll themselves in saving schemes, but contingency can happen at any time. These unplanned expenses like paying for a medical bill can put a dent in your monthly finances and leave you with a cash crunch. Therefore, it is best to take out a personal loan to manage your end-of-month expenses in such a situation.
According to RBI data, credit outstanding for small personal loans increased by 12.1% from September 2020 to September 2021, rising from Rs 26 lakh crore to Rs 29.18 lakh crore. In the same period, overall bank credit grew by only 6.7 percent. It is primarily due to Covid induced uncertainty. There has also been a trend in the growth of small ticket loans in FY21. Despite a 2X rise in active retail loans, average balances per borrower have remained constant.
Small Ticket personal loans are in vogue. They can help you finance all your short-term needs. Moreover, they are a highly accessible and affordable option for credit. In this article, we provide some ways to help you manage your monthly finance if you take credit:
You should first figure out where your money goes other than your EMI and strive to reduce those expenses. To do so, you’ll need to track all of your costs so you can see where your money is going. Then, find strategies to cut the amount you spend.
One clever strategy to carefully check your costs is to create a separate account for loan servicing from your savings account. When you have multiple debts in the same statement, keeping track of them gets tough.
It will be easier to regulate spending and be more disciplined if you have separate accounts for tracking different expenses. Furthermore, you will be able to determine the pattern of your expenses.
You can only save money if you cut back on your spending. It’s essential that you set aside money for a rainy day. There will be times when an unforeseen expense will cause you financial woes. For example, you will have to spend the money you have set aside in case of a medical emergency. In this case, you’ll need a backup plan or a contingency fund. You can start putting aside a part of your savings in an emergency fund so that you can use it when you need it.
Else, you can make a wise move and start investing in mutual funds. Again, if you choose a high-quality mutual fund, you will see positive returns over time.
Certain banks will also provide you with a step-down EMI option. If you choose this option, you will temporarily reduce your EMI payment. In addition, you can also use a step-up EMI option once your income and cash flow have stabilized.
When you have a lot of debt to pay off, it’s best to prioritize and classify them by the interest rate. It would help prioritize paying off the debt with the highest interest rate first. Paying off the loan with the highest interest rate first will help you save money in the long run.
For example, a person has a credit card loan, a personal loan, a home loan, and a car loan, and the credit card debt should be paid off first because it has the highest interest rate. If credit card dues are not paid on time, it is likely to accrue a higher penalty than any other loan with a lower interest rate. Furthermore, repaying a loan with a high-interest rate over a long period means spending more money on interest.
Finding a loan with the lowest feasible interest rate is the most excellent method to ensure that you acquire the funds you require and are not burdened with EMI payments. Because interest rates are directly related to the amount of EMI, a lower interest rate will result in a lower EMI. To locate the most acceptable deal on the market, evaluate the rates offered by banks and non-banking financing firms (NBFCs) and select the one that best meets your needs and payback capacity.
Many banks provide additional discounts and loan schemes to loyal customers with a good credit history.
Therefore, taking out such a loan can help you better manage your finances and save money in the long term. As a result, receiving a loan from a bank with which you already have an account or with whom you have a long-standing relationship is a viable choice.
Need-based and consumption-based credit for users to help them manage their household finances is rising. Smaller ticket loans provide an excellent opportunity to a broader section of people to experience credit and learn fiscal discipline.
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