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How to Manage Personal Loan If You Are Planning to Take a Sabbatical
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Taking a career break is a big decision. It could mean to step away from work for a few months or even a year to travel, upskill, focus on health or take a breather from the daily hustle. But what should you do if there's a personal loan involved? That monthly EMI doesn't pause or take a break. If you plan to take a break from work and have a personal loan, you must know how to manage it well. The same applies if you want to take one before your break.
Start by reviewing your current financial position
Before making any loan related decisions, it is important to review your current financial commitments. If you are already repaying a personal loan, calculate the outstanding principal, check your EMI amount and note how many months of repayment are left. And if you are considering one to manage expenses during your sabbatical, start by calculating how much you need and how comfortably you can repay it.
Using a personal loan calculator at this stage is extremely useful. You can adjust the variables to find an EMI that fits within your expected post sabbatical budget.
Create a financial cushion beforehand
One of the most practical and reliable strategies to stay on top of dues during a sabbatical is to create a reserve well ahead of your planned break. This means setting aside enough to manage all instalments throughout your time away from work.
Suppose your EMI is ₹12,000 per month and you plan to take a six month sabbatical then a buffer of ₹72,000 should be created in advance. This dedicated pool ensures your commitments stay on track even without a steady pay check.
Many individuals prefer to keep this amount in a separate savings account or a short-term liquid investment with easy access. Automating the EMI from this account reduces the risk of missing a payment and helps maintain a healthy credit score.
Consider part prepayment before you take the break
If you have access to surplus funds before your sabbatical begins, using a part of it to prepay a portion of your loan can bring multiple benefits. This reduces your outstanding principal which in turn lowers your interest burden.
For instance, if your current outstanding is ₹3.5 lakh and you prepay ₹1 lakh then the remaining interest payout becomes significantly lower. This reduces pressure on your finances during your time off.
Kotak Mahindra Bank offers flexible part-prepayment options on personal loans to help borrowers manage life transitions like sabbaticals. Available once a year after 12 months, this feature allows partial repayment without heavy charges—just check your loan terms beforehand.
Opt for a longer tenure if you are applying for a loan before the sabbatical
If you plan on taking a loan during your break then choose a longer repayment tenure to reduce your monthly burden. While the overall interest outgo may slightly increase, it helps maintain cash flow throughout your time off.
For instance, a ₹4 lakh loan over five years will have a significantly lower EMI compared to a three-year loan. You can check this yourself using a personal loan calculator for instant results.
Once you resume work and your income stabilises, you can choose to prepay the loan partially or fully to reduce interest expenses.
Look out for EMI restructuring options
Unexpected financial gaps can arise during a sabbatical, especially if plans change or the break extends longer than intended. In such situations, it helps to know whether your lender offers flexible repayment options.
Some banks including Kotak Mahindra Bank, may offer EMI restructuring in genuine cases, based on eligibility and repayment history. You could extend the loan tenure or reduce the EMI for a short time. It may not apply to everyone but it helps to check if you expect any cash flow issues during your break.
It is advisable to communicate with your lender in advance rather than waiting for a payment delay. Being proactive helps in exploring formal solutions without harming your credit profile.
Don’t delay or miss EMIs
A sabbatical does not pause your financial obligations. If your EMI is delayed or missed then it reflects in your credit report and can negatively impact your credit score. This score plays a crucial role when applying for future credit—be it a home loan, credit card or any form of borrowing.
To avoid this, ensure that EMIs are automated. Keep a track of your account balance so there are no transaction failures. It’s also wise to set calendar reminders for EMI dates even if payments are automated.
Managing a personal loan while planning a sabbatical requires foresight, discipline and some careful financial planning. Whether you already have a loan or are applying for one, making informed decisions today can help ensure your break is smooth, stress free, and financially secure.
Kotak Mahindra Bank offers personal loans with flexible repayment tenure of up to 6 years, attractive interest rates and simple tools to help you plan better. Whether you’re taking a break to travel, study or simply recharge, your finances can stay on track with the right approach.
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