How checking your personal loan EMI can stop you from falling into a debt trap

To avoid excessive debt build-ups, you should carefully check your personal loan EMI. It gives you a clear understanding of your monthly outgo and overall financial liabilities.

By reviewing your EMI details, you can plan your overall liability and make informed borrowing decisions. Such a well-planned approach supports long-term financial health and stability.

Why does EMI tracking matter?

Regularly tracking your EMIs ensures your monthly outgo stays within the safe 35–40% of your income limit.

For example, if your monthly income is ₹1,00,000, then your monthly EMI outgo should preferably be within ₹40,000. This helps ensure you are never under unmanageable debt.

Financial institutions like HDFC Bank, ICICI Bank, Bajaj Finance, and Kotak Bank provide EMI calculators on their websites to help borrowers estimate repayment amounts before taking out a new loan. These tools help avoid excessive borrowing or overcommitting to debt.

What are the benefits of checking your EMI?

Helps prevent a debt trap: Once a borrower understands their overall EMI outgo along with other charges, they gain a clear view of their debt obligation and can avoid overborrowing. Proper budgeting through EMI tracking can improve one’s credit score and reduce the risk of default.

Promotes smart financial planning: Regular EMI reviews help you take timely steps like prepayment or balance transfer to manage debt better. Setting up auto-debit for EMIs also helps avoid missed payments and maintain a healthy credit profile.

How can you use the EMI calculator on a bank’s website?

1. Visit the bank's official website and locate the personal loan calculator under the 'Tools' or 'Loans' section.
2. Enter the total amount you plan to borrow (e.g., ₹5,00,000 or ₹10,00,000).
3. Enter the annual interest rate offered by the bank.
4. Select the loan tenure in months or years, as per your goals.
5. Click on ‘Submit’ to instantly see your monthly EMI and total interest payable.

Practical steps for borrowers

• Create a monthly budget that includes all EMIs to understand your repayment capacity.
• Use online EMI calculators before signing any new loan documents.
• Avoid multiple high-interest loans by tracking each EMI against your monthly income.
• Reassess your priorities every three to six months to stay out of a debt trap.
• If in doubt, consult a certified financial advisor before taking on new credit.

Regularly tracking your loan EMIs helps you stay in control of your financial health and avoid future financial trouble.

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