|Speaks the experts at Loanfasttrack; “At times people often commit mistakes by foreclosing their long term secured loans over the existing high-interest rate unsecured loan……………………………
unaware about the fact that it will hardly make a difference to their interest liability.”
Having multiple loan accounts in their names is no longer an uncommon phenomenon with the people, also with the easy availability of the loan funds from the financial lenders/ institutions in the form of Equated Monthly Instalments, there has been a hike in the ratio of the people holding the multiple credits to their account. While these EMI loans are both secured and unsecured in nature, its per month repayment varies with the nature, tenure & the rate of interest of the loan. There are times when managing this multiple repayment goes for a toss especially during the period of financial stress and therefore restructuring these loans become equally necessary & highly important.
Says experts at Loanfasttrack, “With the income increment and improvement in the standard of living of the people, people plan to additionally invest in assets such as properties, plots, machines-Cars, etc., which is yet another reason why the majority of the families hold home loans as well as car loans to their credit. At times they often commit mistakes by foreclosing their long term secured loans over the existing high interest rate unsecured loan in the anticipation of reducing their financial debt burden, unaware about the fact that it will hardly make a difference to their interest liability.” Hence Loanfasttrack suggests the following proven 4 ways of effectively managing the multiple loan repayments at ease.
1) Understand which one to pay off first
It is important that a borrower understands which loan to pay off first if he wishes to reduce his debt. Two common mistakes usually committed by majority of the borrowers, firstly they start contributing equally to all their loans be it home loan, personal loan, mortgage loan, business loan, car loan or credit card dues, etc. and secondly repay the higher figure EMI loan i.e. home loan or mortgage loan over the personal loan, car loan, business loan or credit card dues. Ideally the costlier loans need to be paid off first. By costlier loans it means the loan on which the borrower pays heavy interest to the banks and therefore the borrower must prioritize his loan repayments by paying off the costlier loan first.
Say for example, if Mr. Madhav has Rs.80 Lakhs home loan, Rs.5 Lakhs Car Loan & Rs.15 Lakhs personal loan with the EMI outgo of Rs.62,024/-, Rs.10,258/- & Rs.34,130/- respectively as well as an outstanding dues of Rs.2.5 Lakhs on the credit card, it is wise of Mr. Madhav to repay/close the unsecured loans first over the secured home loan for the following distinctive reasons:
- Interest payable on the unsecured loans (loans without giving collateral) are high in comparison to the secured home loans.
- Secured loans such as home loans provide tax benefits on the principal and interest repaid which is not available on the unsecured loans.
- Since the unsecured loans come with short loan tenures of up-to 5 years, the EMI outgo even for a smaller loan amount is high in comparison to the secured home loan/ loan against property’s higher loan amount.
Additionally, Mr. Madhav must also ensure prioritizing repayments of his unsecured loans i.e., personal loan / business loan or credit card dues. If he wishes to gain financial freedom sooner, it is advisable he prepays the personal/business loan first over the credit card dues.
2) Stop borrowing additional funds to repay the existing debt EMIs
Borrowing an additional smaller amount to repay the existing monthly loan instalments cannot be a clever idea if financial freedom is to be gained. The borrower might feel temporarily relieved from the burden but eventually it mounts up to form a mountain of debts over a long run causing additional hardship for the borrower to repay them altogether.
Therefore, if a borrower gets stuck in any situation of financial stress/crisis he must first approach his lender Bank/NBFCs for a solution which can be – applying for a temporary EMI moratorium or getting his EMIs restructured by increasing the loan tenure or reducing the rate of interest thereby helping him to reduce his EMI outgo.
3) Switch loans with high interest rates to Banks/NBFCs with lower interest rate
A reduction in the interest rate will reduce the liability towards the total interest payable to the Bank/NBFC on the borrowed loan amount and also helps in managing the monthly repayment with reduced EMIs. Suitable for the long term loans such as secured home loans or loan against property, the borrower can opt for a home loan balance transfer or mortgage loan balance transfer with additional loans i.e. top up loans to pay off his other high interest outgo unsecured loans. This process of consolidating the debt is referred to as “Debt Consolidation”. (Click for the home loan comparison chart of the leading banks)
However, it is important to weigh the pros and cons of the loan transfers before transferring the loan to a new lender which means evaluating the transfer cost and actual savings on the transfers with new changed interest rates, tenure and lender’s terms and conditions, etc. It is advisable the borrower make comparative evaluation of the top banks to secure a low cost & low interest rate loan for him. Loanfasttrack is the best online platform that provides you the instant comparison on the interest rates of the top banks – Click to get free quotes of top banks.
Additional Read: Home Loan Interest Rates | Compare Rates Of Top Banks
4) Opt for a Top Up loan on secured loan i.e.- Home Loan
Getting a top-up loan on a home loan in order to close other high internet rate unsecured loans, is yet another form of debt consolidation. Mainly because top up loans are cheaper in comparison to unsecured personal loans / business loans and are also available for a longer term of 15 years unlike the unsecured loan having a maximum repayment tenure of 7 years, the EMI on the top up loans will be much less in comparison to the combined EMIs of all unsecured loans. This helps the borrower manage his financial imbalances with reduced EMIs and also clears the chaos of repaying multiple banks on various EMI dates.
Additional Read: Why Home Loan Interest Rates Of NBFCs Higher Than Banks
Loanfasttrack is a Mumbai based loan provider company since 2015 offering loan services in Mumbai on– housing loan in Mumbai, mortgage loan in Mumbai, personal loan in Mumbai, business Loan in Mumbai, unsecured business loans, home loan transfer, top-up loans and loan transfers. Loanfasttrack is a direct sales associate with leading banks namely, ICICI Bank, HDFC Ltd, Canara Bank, Citi Bank, Piramal Housing Finance, etc.
Seek expert advice on 9321020476.
You can also email on firstname.lastname@example.org.
Loanfasttrack’s specialized services includes providing:
- The best bank for home loan.
- Best Banks For Mortgage Loan In India
- Assured low interest rates for loan against property in Mumbai.
- Lowest home loan rates in Mumbai.
- Instant loan in Mumbai.
- Instant personal loan in Mumbai & business loan in Mumbai
- Low cost home loan balance transfer.
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