An engineer loan is a debt instrument designed categorically for self-employed engineers who are running a business enterprise either by themselves or in partnership with others. A business loan for engineers are provided by financial institutions like banks and Non-Banking Financial Companies (NBFCs) on the fulfillment of certain preliminary conditions. These are basically the eligibility criteria that are different for every bank or NBFC. Once the loan is availed, the applicant will have to service the interest and the principal borrowed through Equated Monthly Instalments (EMI). This part can be a bit tricky as, for a business owner there are a lot of other expenses that need to be taken care of along with the loan.
To make management of the debt services of an engineer loan easier, these are a few tips that are worth considering:
The primary step to manage current financial liabilities is consolidating them. Simply put, this is nothing but integrating debts together to make repayment easier and reducing the number of payments by availing a new loan. This helps in reducing any late payments. The only important thing to take care of here is that there should not be a large margin in the total amount to be repaid before and after consolidation.
The credit or CIBIL score is very important as it helps in getting a loan at a low rate of interest. Moreover, repayments made for the loan are recorded in the credit report of an individual and contribute towards the credit score.
Making Best Use of Additional Funds
Generally, with any additional funds, it is best to pay multiple EMIs to close the loan sooner and reduce the amount owed to the bank or NBFC. Such prepayments help in reducing the interest, but it is important to look into the policies of the lender as some of them levy a penalty for prepayments.
Engineer loans can be availed as term loans and lines of credit as well. The latter are offered by fewer lending institutions- they are flexible debt instruments wherein the borrower is allowed a credit limit from which he /she can make repayments as and when required. Repayment involves paying the interest on the amount withdrawn from the limit during the tenure. At the end of the tenure, the sum borrowed is to be repaid.
One does not need to be an expert in finance to manage their loan payment availed like a smart borrower. Following the simple steps mentioned above for the availed engineer loan, there should not be any difficulty in repaying the loan.