Managing Your Finances: Navigating Personal Loan EMIs Like a Pro 

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Managing one’s finances can be a test of patience and discipline. With expenses that seem to grow every year and stagnant income, it can be tough to make ends meet. So, what do you do when your expenses exceed your earnings, and you need cash? You can apply for a personal loan. Personal loans are a great financial tool that can help you meet various needs such as fulfilling your education, consolidating debt, buying a house or car, or for medical emergencies. 

However, taking a personal loan comes with its costs. You need to think about the interest, term, and EMI payments that come with it. Here, we discuss how to navigate personal loan EMI like a pro.

Understanding Personal Loan EMIs

EMI or equated monthly instalment is the amount you pay each month to the lender in order to repay your personal loan. An EMI consists of two parts: the principal amount and the interest levied on it. The principal amount is the money you borrowed, while the interest is the cost of borrowing money. The interest rate varies from lender to lender and depends on several factors such as credit score, income, and the amount of loan taken.

To understand how EMIs work, let’s take an example. Suppose you borrowed Rs. 1 lakh at an interest rate of 12% per annum for a period of three years. Your EMI would be approximately Rs. 3,321.

The EMI contains both interest and principal amounts, and with every payment, you clear a portion of both. At the start of the loan tenure, the EMI is majorly composed of interest, and a small portion of the principal amount is repaid. Over time, the share of the principal amount in the EMI increases, and the interest component decreases. This pattern continues until the loan is fully repaid.

Tips for Navigating Personal Loan EMIs

Now that you understand how personal loan EMIs work, take a look at some tips for managing them like a pro:

1. Consider opting for fixed or floating interest rate

When you take a personal loan, it’s essential to choose between a fixed or floating interest rate. A fixed interest rate means the EMIs remain the same throughout the loan tenure, while a floating interest rate means the EMIs may change as per the prevailing interest rate. If you want a predictable EMI payment each month, opt for a fixed interest rate. If you believe that interest rates may decrease during the loan tenure, you can opt for a floating interest rate.

2. Check and manage your finances before borrowing

Before applying for a personal loan, assess your finances. Determine your income and expenses, and decide if you have the means to repay the loan over the tenure. Don’t borrow more than you can afford to repay. If you evade paying your EMIs, it may lead to a debt trap that can impact your credit rating and result in legal action by the lender.

3. Choose the loan tenure wisely

When you opt for a personal loan, you also have to decide on the loan tenure. The tenure of a loan can range from 1 to 5 years. If you have the means to pay higher EMI amounts, opt for a shorter tenure as it reduces your overall interest payout. Conversely, if you prefer smaller EMI amounts, opt for a longer tenure.

4. Use EMI calculator

Before applying for a personal loan, use an EMI calculator to understand how much you will pay every month. It gives you an estimation of the EMI amount based on the loan amount, interest rate, and tenure. This will help you determine if the loan is affordable, and you can manage to pay the EMIs without any stress.

5. Try to pay more than the EMI

When you have some extra money, use it to make prepayments on your personal loan. Prepayments are additional payments made apart from your EMI. They help reduce the principal amount, which in turn reduces the interest payout and helps you close your loan faster. Keep in mind that some lenders may not accept prepayments, so check with your lender before you make any additional payments.

6. Read the fine print

Before taking a personal loan, make sure to read the loan agreement carefully. It’s essential to understand the terms and conditions, including late payment charges, processing fees, and prepayment charges, including the personal loan processing fee. Make an informed decision after going through all the details to ensure you are aware of all the associated costs and conditions.


Personal loans help millions of individuals fulfill their financial needs. However, as with any loan, personal loans come with the responsibility and cost of repaying the principal amount and the interest levied on it. Personal loan EMIs can be managed effectively by understanding how they work and following the above tips. Plan your finances before borrowing, choose the loan tenure and interest rate wisely, and make extra payments whenever possible. By doing this, you will be able to manage your personal loan EMIs like a pro.

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