EMIs Are Exciting! But Know These 7 EMI Mistakes to Avoid

EMIs Are Exciting! But Know These 7 EMI Mistakes to Avoid

EMI Calculator Financial Advice & Tips
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Personal loans offer vital support in emergencies or for unexpected expenses. Equated monthly instalments (EMIs) are fixed payments that are dedicated to these loans. Every month, you make these personal loan EMI payments, consisting of both principal repayment and accrued interest on the outstanding loan amount. However, there are some mistakes borrowers make when repaying loans through EMIs, which can quickly turn into a costly affair. In this blog, you’ll know about these common EMI mistakes in detail.

7 Common EMI Mistakes to Avoid When Making Loan Repayments

Here are seven EMI mistakes you need to watch out for and how to sidestep them to gain maximum financial freedom:

  1. Not Budgeting for EMIs

    EMIs should become a part of your monthly expenses when it comes to availing personal loans. Just like how you plan for your groceries, utilities, and other financial commitments, the EMI amount should be factored into your monthly budget. Missing EMI payment timelines can reduce your credit score, and borrowers should do their best to ensure timely repayments proactively.

    A good way to budget for EMIs is to take care of your monthly financial responsibilities first. See if you have the budget to repay and apply for loans. If the answer is yes, then go for it.

  2. Missed Or Late Payments

    If you are a salaried individual and your salary is credited on the 10th of every month, set the EMI repayment date to the 11th or after. If your EMI repayment date is before your salary date, you can risk your credit score declining due to a missed repayment. Most lenders have late fee policies and ask borrowers to set up auto-debit facilities. Utilise scheduled reminders and ensure your bank account has sufficient funds to make personal loan EMI payments hassle-free.

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  3. Choosing a Longer Repayment Tenure

    Choosing a longer repayment tenure may reduce your total EMI monthly amount. However, the convenience comes at a hidden cost. A longer repayment tenure translates to more interest accrued over time. Opt for a repayment schedule that best suits your budget, and do not extend the repayment timeline unless absolutely needed.

    Let’s see what happens if you opt for a longer repayment tenure for additional context. Mr. Ram borrows Rs 50,000 at an interest rate of 16% p.a., while Mr. Sharma borrows the same amount at a similar interest rate.

    Mr. Ram selects 12-month repayment tenure, whereas Mr. Sharma chooses 24 months. Ram’s monthly EMI is Rs 4,537, and the total amount of interest accrued is Rs 4,439, thus making his total repayment amount Rs 54,439.

    Mr. Sharma’s monthly EMI is Rs 2,448; however, the interest he pays is Rs 8,756, thus making his total repayment Rs 58,756 by the end of his EMI tenure.

  4. Ignoring Hidden Charges

    Not reviewing the terms and conditions of loan agreements is a mistake many borrowers make. Every lender has different repayment policies and may subject borrowers to hidden fees. . Look for such clauses in these agreements and read them carefully before signing them.

    There are processing charges involved with most loans, and it’s important to take note of this before you avail of a loan. p There may also be convenience charges added to the application processing.

  5. Not Comparing Other Offers

    Not comparing other offers is a huge mistake borrowers make when taking out loans. It’s important to weigh the pros and cons of different loan types, as each financial institution has its own repayment clauses, policies, and terms and conditions.

    Borrowers can benefit from attractive interest rates and flexible repayment schedules when considering other offers.

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  6. Borrowing More Than You Can Afford

    Do not borrow beyond what you can afford. It is a good practice to borrow only up to the amount one can realistically repay. Borrowing too much and being unable to make timely EMI payments can negatively impact the credit score. It also leads to other financial pitfalls that can affect one’s future.

    Practising good financial habits, such as borrowing responsibly, can set you up for future success. It enhances a borrower’s creditworthiness, which, in turn, makes them eligible for better offers later on.

  7. Ignoring Prepayment Options

    Many banks and financial institutions offer the ability to prepay loans alongside making EMI payments. Taking advantage of this facility is crucial as it reduces overall financial burden.

    Prepaying loans can reduce interest charges and expedite the loan repayment process. However, keep in mind that some institutions may incur prepayment charges, restrictions, or levy prepayment penalties. The prepayment terms and conditions will vary from lender to lender.


Navigating the world of EMIs takes a bit of study from the borrower’s end, but it is worth it. By implementing these tips, you can streamline the loan repayment experience and enjoy a positive borrower’s journey. It’s also a great way to improve your creditworthiness and make sure you stay on track with timely repayments. Ultimately, effectively understanding and managing your EMIs can lead to financial stability and peace of mind.


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