Are there ways to pay off your loan as soon as possible? Can I pay the bulk of my loan finances before the year comes to an end? What if I could start a new year afresh without the burden of the unpaid debt? If these questions are on your mind, this is the article for you.
Curious? Let’s take a look.
How you can pay off personal loan and reduce the stress on your finances
#1 Utilise your savings to close your loan
If you have enough funds set aside to pay off your loan amount in full, you should do it. This is essentially closing your loan before the tenure, also called pre-closing your loan. The benefit? Since you pay the entire outstanding loan amount at once, you save funds that would otherwise go into paying interest on your personal loan.
#2 Prepay a bulk of your loan amount
Suppose you get an annual bonus, your fixed deposit matures, or your investment returns materialise; you can use these funds to pay off the bulk of your loan. This is known as loan prepayment, and it helps reduce your loan liability effectively. Additionally, when you prepay a large chunk of your loan, you reduce the total unpaid debt. This way, you lower the funds spent on loan interest significantly.
Remember, many lenders charge a prepayment fee if you pay your loan amount before the tenure. So, make sure to check the prepayment terms and the penalties involved before you opt to prepay your loan.
#3 Reduce your loan tenure whenever possible
Many lenders provide flexible repayment options, including changing your loan tenure. So, when you receive an appraisal or some variable income in the form of a new year bonus, you can choose to reduce your loan tenure by a few months. Here, while your EMI size increases, you reduce the overall interest payable.
Curious about how reducing your loan tenure will affect your EMIs? You can now figure out your EMIs payable using an online personal loan EMI calculator. Input your loan amount, tenure, and rate of interest; the calculator will give you a complete breakdown of your monthly instalments and the interest payable.
#4 Refinance your loan with a different lender
By now, you know your lender plays a significant role in determining how convenient your loan repayments are. So, if you are currently servicing a loan with high personal loan interest rates, you can choose to refinance your loan with a different lender offering better rates. This way, you reduce the funds you spend on repaying interest, and with a shorter tenure, you can close off the loan faster.
Additional Read – Personal Loan Prepayment in India: Pros and Cons
Over to you
If you want to pay off your loan before the end of the year, the tips mentioned above should help. However, when looking for a lender to refinance your loan, turn to Tata Capital for a comfortable borrowing experience. Along with easy-to-meet personal loan eligibility terms and tailor-made loans, we offer flexible repayment plans and no hidden prepayment penalties.