How To Smartly Manage Your SBI Personal Loan Repayment Without Hurting Your Financial Health


Personal loans surely help achieve a plethora of life goals, besides bailing us out of financial emergencies through quick disbursal. Right? Whether it’s the goal of renovating your home, doing business expansion or funding a child’s higher education and marriage, SBI personal loan can lend a helping hand to fulfil all such requirements. 

And that is why, quite naturally, most applicants breathe a sigh of relief when their application gets rejected, especially after going through the entire process of estimating the loan amount, finding a suitable lender, choosing the right tenure, getting the loan approved and finally having the loan amount credited to your bank account. 

But do not think that your task is over. After getting the personal loan amount credited, what impacts your financial future is how you handle the repayment through EMIs. 

So, let us explain some super-smart moves to manage your loan, which you have got at the applicable SBI personal loan interest rate, and ensure your financial health stays strong as well.

Never delay or miss SBI personal loan EMI.

While repaying the personal loan or any other loan, too, it is absolutely necessary to make sure you develop the regular habit of always paying the EMIs timely and in full. Such behaviour of discipline, as well as regular repayments of your EMIs, always reflects favourably in your credit score and report. And subsequently, having a good credit score can assist in grabbing lower interest rates on SBI personal loan.

However, note that any form of delay in personal loan repayment is capable of pulling down your credit score significantly, even if you had taken the loan at a low SBI personal loan interest rate. And this harm to your credit score will also hamper your future loan eligibility as well as loan approval chances, besides imposition of applicable penalties on that delay or at worse default. 

Submit partial or full prepayments when you receive a bonus or other surplus money

It’s good to make prepayment towards your SBI personal loan, whether partially or in entirety. This move can lead to substantial savings in overall SBI personal loan interest rate cost.

So, during repayment of your loan EMIs, try your best to prepay in full or even partially whenever you have additional funds from annual or festive bonuses or maturing of investments. 

Remember, even though floating rate personal loans usually do not involve any prepayment charges thanks to mandatory RBI guidelines, personal loan lenders may levy prepayment charges on fixed-rate personal loans. Hence, do your homework before making any prepayment, and make sure the savings in the overall interest payout as per applicable SBI personal loan interest rate always outweigh the prepayment charges of the personal loan.

And that’s not all. Ensure to evaluate the opportunity cost of not investing and instead choosing to utilize the surplus funds for prepayment of personal loan. In this case, note that the opportunity cost of not investing is the expected returns on instead investing the money, which you would rather forgo by choosing to not invest and go for prepayment of your personal loan.

Utilize balance transfer facility when it seems feasible

During the repayment of your existing SBI personal loan, it’s best to always keep a tab on the personal loan rates, terms and services being offered by other lenders. If some other lender is offering you a lower interest rate and better service terms for your existing loan, first try to submit a request to your existing lender to provide you with a lower interest rate.

Then in case, the lender refuses to accept your request, you should move forward and consider transferring your outstanding personal loan balance to a better lender, as this will help lower the total interest payout of your personal loan.

But, remember that the new lender generally considers your request for a balance transfer as a fresh and new personal loan application. So ensure that you do take into consideration the numerous costs that may be involved, like processing fees, administrative charges etc. Ensure to go ahead only if the total savings derived through personal loan balance transfer are significantly outweighing any of the involved fees or costs.

Also, some personal loan lenders may offer a top-up facility on personal loan balance transfers, as per your eligibility and currently applicable SBI personal loan interest rate. You can take this facility if you need an additional loan amount during the balance transfer.

Never use your emergency fund until totally unavoidable

Having an adequate emergency fund which amounts to at least 6 times your fixed monthly expenses assists in tackling some of the financial exigencies such as sudden job loss or severe or critical illness. While repaying your personal loan, avoid disturbing your emergency fund until & unless you are facing difficulty or problems in paying your EMIs.

Moreover, when you plan to make a prepayment of your SBI personal loan & determine the amount you have as surplus to prepay, make sure that you don’t exhaust your finances & are adequately left with enough savings to maintain liquidity. Also, remember to never disturb your emergency fund, & it continues to remain at the level of at least six times your fixed monthly expenses. 

Check the ratio of existing income to EMI.

In case you are eligible in India to take another personal loan as per your eligibility and are serving the present SBI loan at a low SBI personal loan interest rate, then ensure to not overlook your existing FOIR before going ahead for a new loan. FOIR is a fixed obligation to income ratio,  meaning the proportion of your monthly net/gross income already being spent on debt payments, such as loan EMIs. Credit card bills etc. As the presence of a high level of FOIR indicates that a big portion of your monthly income is going out on EMIs etc., personal loan lenders may perceive it as a higher likelihood of defaulting in future EMIs. So, your SBI personal loan approval chances may take a hit.

Therefore, before finally going ahead to apply for a new loan, always make sure this ratio, of course after taking into consideration the new expected loan’s EMI, is not breaching the 50% mark. If it is going beyond that, then consider first repaying your existing loan EMIs and complete the tenure or prepay if you can, and then take the new loan. Try to first finish off the costliest loans first, which have a high SBI personal loan interest rate.

Summing it up

Always keep in mind that taking an SBI personal loan affects both your present as well as future financial position, right? It’s a responsibility in itself until its repayment gets completed upon tenure completion or prepayment. 

Also, personal loans are one of the most common options opted by lots of borrowers since there is no boundation on the end usage of the loan, they are promptly disbursed and credited to an account, and last but not least, they do not require any compulsory collateral, security or margin. 

But, do not become careless when applying and repaying it. Ensure to pay attention to even the minute details while applying for your SBI loan, as this can prevent any future unpleasant surprise which can harm your financial health.


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