Hello! Eager & Hopeful, First Time Personal Loan Borrower!
We have a statement for you that you must etch on stone – ‘PAY YOUR EMIs ON TIME’. Our digital lending platform has served many salaried individuals during a financial crisis. Whether it was for purchasing an iPhone for a girlfriend on Valentines, booking air tickets to surprise a wife for an anniversary or paying-off medical bills for an ailing father, Loan Singh has always been there for you. Many of you had more than the minimum credit score, the monthly salary and the documents which helped you get the funds within 48 hours. The area where some of you hit the axe on the foot was your EMI repayment. Why the trouble in repaying your EMIs? You are a salaried millennial just like many other. All you need to do is to instill some discipline in your life. Defaulting on EMIs is extremely bad and could hurt you in more ways than you expect. As a salaried individual, there are multiple roadblocks that you can face. We thought of putting down some of them in this article. Let’s look at some of them and also look at why you need to overcome these roadblocks to be prompt on your personal loan EMI repayments.
This is something we are taught since childhood. Lucky few start getting pocket money from their parents at an early age. Back then, a Rs. 10 currency note was be a big deal. Rs. 2 were used for travel, another Rs.2 for candy and the rest would kept in the piggy bank. As you grew, there were more expenses to worry about such as tuition fees, hostel fees, night outs and dates. We were always taught to save the most and spend only when necessary.
Nowadays, a salaried millennial would understand money management as budgeting, saving, investing, spending and keeping track of all of these. It also includes tracking of banking activities like withdrawals made, transferred funds, monthly statements of credit card, etc. Money management shows us our spending patterns which help us to gauge which are the expenses or purchases that do not add any value to our financial goals and understand the best avenues to invest in.
Proper money management helps you reduce risk. It involves looking ahead with a negative bias. Looking at the ‘What if’ scenarios and taking appropriate action. It signals when to stop spending money before you run out of it. Make allowances for unforeseen circumstances and treat savings as a priority.
Now you would ask “What does proper management of money have to do with personal loan EMIs?” “We apply for a loan when we do not have funds to spend. Don’t we?” “Loan Singh has already done our income and credit score check, so what more to worry about?” These questions are valid. But, despite all this, we as a digital lending platform encounter borrowers who have failed with their EMI repayments regularly and then regret not focusing on managing their money better.
Roadblocks in money management
Roadblocks are barricades or obstacles that prevent a smooth passage over the road. Applying the same analogy to our financial route, this will be our path to financial freedom. We have borrowed a personal loan, and are obliged to clear it off without a hitch. Some common roadblocks faced by a salaried individual are
Exceeding the monthly budget
Crossing the monthly budget is a common occurrence among millennials, and should be avoided. If you consistently breach your monthly budget, then it’s time for you to re-plan and re-do your budget.
Check what you are constantly over spending on. See if you are reviewing the expenses based on receipts and statements.
You cannot predict when sudden expenses may come-up. Your laptop may breakdown and need repairs, the car might just stall one day needing engine work, a leakage in the ceiling just before rains, sudden hospitalization of loved ones, etc. are just some examples which can throw your savings out of the window. If you don’t plan a good budget, then these emergencies can prove costly.
Being lax about budgeting
There is a tendency among us to be lazy when it comes to keeping an eye on our budget. We take the time out to prepare a good budget and also have great money management ideas, but procrastinate over actually tracking and managing the budget.
Or, we may purchase 3-4 policies or make multiple fixed deposits hoping that it would be enough to manage our savings and make little effort to review these investment instruments.
How to manage money better?
Managing money requires a good deal of self-discipline, but it is not an impossible task. We put up some ideas for you to manage your money better so that you never have to miss on any EMI repayments at Loan Singh.
Set financial goals
Writing down your goals will help you prioritize your spending. Prepare short term (achievable under a year), medium term (between 1-5 years) and long term goals (five years plus) on cards or stickers and put them up around the house.
For short term goals, you can work towards all of them at once. Look at how much you need. For example – to purchase a new laptop within the next 6 months. Have you started saving for it yet? Where can you allocate funds for that?
For long term goals you will have to plan a bit harder because you will have many expenses along the next 5 years.
Divide your spending plan into separate categories with necessities taking priority. Groceries, utilities, insurance payment, policy payment, personal loan EMIs and credit card bill payments should take precedence over other expenses.
Create a budget
A budget guides your spending decisions, so that you spend on things that are important. It sets margins on spending, and by staying within those limits you can stay on track. The most important rule of a good budget is – Your Expenses should never be more than your Income.
Review earlier month expenses for inaccuracies or make corrections to the current month’s expenses. Use receipts, statements or bills to evaluate the accuracy on the expenses.
If your expenses cross your income, try and change your spending pattern to stay true to the goals you have set for yourself.
Prepare a list before you go out shopping and buy only what’s on it. Avoid excessive use of credit cards, minimizing the chances of falling into credit card debt.
Track your spending or expenses
Track your expenses for a minimum of one month. The longer you track, the better. Write down the purchases you have made in a notebook or an excel spreadsheet or use a smartphone app.
Use debit or credit cards for transactions, so you can maintain receipts which you can utilize when tallying expenses during the end of the month.
Keep all your financial information and budgetary paperwork in one place. This will save you time because when you do want to plan or assess your financial goals, you will find all the information easily.
Focus on savings and review
Savings provide you with a safety net during challenging times. You should save depending upon your financial goals. Start with around 10% of your income each month and then slowly increase it as months progress.
Investment options such as mutual funds, recurring or fixed deposits are ways you can improve your savings in the long term. When you receive a raise in salary, use this extra cash to increase the amount of savings you maintain.
Every once in a week, take time to review your budget and savings. See if you are on track with your financial goals. Check if you need to shift some amount from savings to emergency funds. Fine tune the financial plan, if need be.
Benefits of prompt EMI repayments
Build a Good Repayment History with Loan Singh to avail a second loan
Yes! That is true. The awesome thing about availing a personal loan from Loan Singh is the prompt repayment history you build. We appreciate your efforts to pay the EMIs on time and ensure you can then avail another loan faster than the first one. Please do not make it difficult for us, and for yourself, by defaulting in your EMI repayments.
Save More by Avoiding Added Charges on Default
Nobody wants to pay more for anything. You look at the cashier with aghast when he/she tells you “Sir! Your bill is coming to Rs.4999/- Is it okay if I redirect your balance of Re.1 to the children’s fund?” While this is a noble thought, people always expect us to feel no worry to impart a little from what we already earn. You have so many other priorities to spend your money on instead of paying extra over a loan default.
Pay EMIs on Time to Prevent a Late Penalty
With a late penalty you not only have to spend more, you still have to face the ignominy of being a defaulter. It is a worrying sign. The prospective EMI repayments will have added reminders over SMS, Email and Call. Wouldn’t it be better if you set up reminders by yourself over your Gmail calendar, put up sticky notes on your fridge or simply provide Loan Singh with your details to auto debit the EMI amount before the due-date.
Boost Your Credit Score by Indicating Prompt EMI Repayments
We have been reiterating about building your credit score since day one. A good repayment history with Loan Singh, will allow you to avail a second loan without a hick. But, this will also boost your credit score to help you get a credit via various credit instruments such as cards, secured loans, etc.
Trust Built Among Lenders Thereby Improving Your Credibility
Loan Singh’s digital lending platform allows lenders to invest their money to receive high returns. Now, if you pay your EMIs on time, it gives the lenders a sense of security that good borrowers are availing a personal loan. This not only convinces the lenders to continue investing their cash to serve your emergency requirements, but you can always remain assured of receiving emergency cash from Loan Singh’s platform.