Many people find themselves drowning in EMIs from multiple personal loans. Whether it's for a wedding, medical emergency, home renovation, or simply bridging cash flow gaps, personal loans have become incredibly accessible.
However, juggling several loans often leads to high monthly outflows, stress, and sometimes missed payments that hurt your credit score.
The good thing is that managing multiple loans doesn't have to be a slow descent into a debt trap. Here are some of the things you can do to take control of your finances and breathe easy again.
1. Debt Snowball vs Debt Avalanche
When you have multiple repayments, you need a strategy. Choosing one of these two popular methods can provide the structure you're missing:
- The Debt Snowball: Pay off the smallest loan amount first while paying the minimum on others. The "win" of closing a loan quickly gives you the psychological boost to tackle the bigger ones.
- The Debt Avalanche: Focus all extra funds on the loan with the highest interest rate. Mathematically, this saves you the most money in the long run, though it might take longer to see a loan account actually close.
2. Consider Debt Consolidation
If you are juggling four different EMIs at varying interest rates, why not turn them into one?
You can take out a single, larger loan for debt consolidation at a lower interest rate to pay off all your smaller, high-interest debts. Thus, you have to take care of only one due date, one EMI, and usually a lower total interest burden.
Ensure the processing fees for the new loan don't outweigh the interest savings.
3. Create (And Stick To) A Realistic Budget
Track your monthly income and expenses for at least a month. Divide spending into needs, wants, and debt repayments. Cut non-essentials ruthlessly, such as dining out, subscriptions, and impulse buys.
Redirect savings to extra EMI payments. Automate EMIs via standing instructions to avoid late fees and credit score damage.
4. Make Prepayments Whenever Possible
Most personal loans allow partial or full prepayment without heavy charges, especially after the initial lock-in period. You can use bonuses, tax refunds, or any windfall to prepay. Aim to prepay high-interest loans first.
5. Build An Emergency Fund And Avoid New Debt
Once under control, save 3–6 months' expenses in a liquid fund or savings account. This prevents taking new loans for dealing with emergencies. If needed, explore lower-cost alternatives like gold loans or top-ups on existing lower-rate loans.
Drowning in EMIs is common, but it's not permanent. By assessing your debts honestly, budgeting tightly, prioritising smartly, and exploring consolidation, you can reduce stress and interest costs significantly.
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