If you’re a cash loan borrower, you may have watched the news nervously as the Reserve Bank of India raised the key interest by 40 basis points this year. In response, many banks and financial institutions increased their interest rates for personal, home, and auto loans.
If you are feeling the pinch as interest rates begin to rise, take a breath. There are still a few things you can do to manage your loan and stay on top of your repayments.
4 tips to help you deal with interest rate hikes
1. Get budgeting
The first step is to get a clear idea of your finances. Once you know how much you’re bringing in each month, you can start to make a plan for repaying your loan. Track your spending for a month or two and see where most of your money is being spent. Once you know where your money is going, you can start to make some changes.
By cutting back on expenses, you can create a little extra money that can go towards your loan repayments. With a little bit of planning and careful budgeting, you can take control of your finances and get your cash loan repayment on track.
2. Make extra repayments
If you can afford to, make extra repayments on your loan. This will help to reduce the overall amount of interest you’re paying and can help you to pay off your loan sooner. You need to make sure that your loan allows for prepayments. Some loans forbid prepayments or charge you a prepayment fee. If you’re not sure whether or not your loan permits prepayments, check with your lender.
If your lender allows for prepayments, you need to find out how those payments will be applied. Some loans apply the extra payments to the principal balance, while others apply it to the next month’s interest.
If you’re looking to save money on interest, you’ll want to make sure that your extra payments are applied to the principal balance. This will reduce the amount of interest you accrue over the life of the loan. Alternatively, if you’re looking to shorten the life of your loan, making extra payments toward the next month’s interest can help you do that.
Evaluate all the options and go with the one where you save the most.
3. Shop around for a better deal
If you’re finding it difficult to manage your cash loan repayments, it may be time to look for a better deal. There are plenty of lenders out there who offer competitive rates and repayment options, so it’s worth doing your research to find the best deal for you.
One of the main reasons to shop around for a better loan option is to get a lower interest rate. This can save you a lot of money in the long run, so it’s worth taking the time to compare rates from different lenders.
If you are facing interest hikes on multiple cash loans, you can consider debt consolidation. This involves taking out a new personal loan with better terms to pay off your existing loans. This can help you simplify your monthly payments by combining multiple debts into one payment. It can also save you money on interest, so it’s worth considering if you have a lot of high-interest debt.
4. Speak to your lender for better terms
If you’re struggling to make your repayments, the best thing to do is to talk to your lender. They may be able to offer you alternative repayment options or a more flexible repayment schedule. You can request a longer tenure to pay off your loan which will lead to smaller monthly repayments. This might help you make your payments in time and thus, prevent a negative impact on your credit report.
If you’re finding it difficult to manage your cash loan, hopefully, these tips will help. Just remember to budget, make extra repayments, and do your research. Most importantly, ask for help if you need it.
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