How a financial planner can help you optimise your personal loan – find out here

Personal loans are becoming increasingly popular today as a quick solution for many people. They provide access to funds for various needs, such as school fees, emergency surgeries, home renovations, or even travel. While personal loans offer easy access to money, managing and repaying the debt effectively is crucial. In this scenario, a financial planner can help optimise the use of personal loans.

What is personal loan optimization?

The process of managing a personal loan efficiently to save expenses (such as interest) and prevent taking on too much debt is known as personal loan optimisation. This includes tactics like:

• Reducing the burden of interest
• Managing EMI according to your income
• Choosing the right loan term
• Preventing late or defaulted payments

By providing professional guidance that reflects each client's financial condition, the financial planner enables the client to optimise the use of loans.

How Does a Financial Planner Help with Personal Loan Optimization?

1. Review of loan conditions and terms: Most applicants who seek a personal loan fail to read the fine print. A financial advisor explains the terms of repayment and interest rates, among other charges, of the loan agreement to clients.

2. Repayment plan: The most common problem with personal loans is tracking monthly EMI payments. A financial planner helps people devise a repayment plan that suits their lifestyle, income and other financial commitments. They also determine the best way to allocate funds between savings, loan repayment and other financial goals.

3. Interest burden reduces: Personal loans with long tenures see interest outgoes increase rapidly. A financial planner assists the person in selecting the most suitable loan tenure. Higher EMIs but lesser total interest outgoes often accompany shorter tenures. Long tenures can reduce EMIs but can increase the cost of interest.

4. Prepayment and loan foreclosure guidance: Most Indian lenders offer the facility to prepay loans, which gives huge interest savings compared to the total interest paid. Depending on the customer's financial situation, a financial planner guides customers on when and how to prepay.

5. Tax planning: While personal loans are usually not tax-deductible, Section 80E might offer tax benefits for some lending purposes in India, such as educational loans. A financial planner can facilitate the easier repayment of college loans by educating borrowers on how to qualify for these benefits while reducing taxable income.

6. Credit score development: A financial planner will be needed to help the customer raise their credit score, directly impacting personal loan interest rates. A planner works with clients to enhance credit, which can be done by educating the client on responsible credit management, such as decreasing per cent credit utilization or paying down outstanding credit balances.

Why Should Indians Consider a Financial Planner for Loan Optimization?

• Loan understanding: This can be attributed to financial planners understanding complex loan terms and knowing exactly what to offer.
• Long-term financial planning: A financial planner uses an integrated approach to ensure that loan payments do not hinder retirement plans, investments, or long-term savings.
• Debt management expertise: If a person has multiple loans, a financial planner can help develop a payment plan to pay off those loans efficiently. A planner can advise on how to consolidate loans or which high-interest loans to prioritize for quicker payoff.

In conclusion, personal loan optimisation is crucial to efficient financial management. With personal loans gaining popularity in India, having a financial planner by your side makes all the difference. Whether it's a choice of loan terms, minimum interest costs, or a repayment strategy, the financial planner will ensure that the management of personal loans goes in tandem with the overall financial management goals.

(Note: Raising a loan comes with its own risks. So, due caution is advised)