Do you have an active personal loan account and plan to repay the debt before its tenure?
We have got you covered.
While personal loans have been a go-to-option to meet short-term financial requirements, at the end of the day, it is a liability that needs to be paid off along with additional interest. This is why one should consider repaying it faster to enjoy a debt-free life.
Read along to find effective ways to manage and pay off personal loans faster below.
Simple and Effective Ways to Repay a Personal Loan
1. Select a shorter tenure
While a shorter tenure translates to a higher EMI amount, it helps to repay the borrowed sum faster. For example, an SBFC personal loan comes with a term that extends up to 5 years. Choosing a repayment period that borders on the shorter side can help pay off personal loans faster.
Besides that, a shorter loan tenure helps lower the interest burden and save more on the cost of borrowing. However, as discussed, a shorter tenure impacts your EMI amount. So, it is advisable to choose a repayment period that does not burden you with a high EMI and helps manage borrowings without straining finances.
2. Foreclosing loan account
The best way to repay the loan faster and save on the overall interest component is to foreclose the account. However, before you opt for this measure, find out the accompanying penalty or prepayment charge from your lender.
Subsequently, calculate whether foreclosing the loan (with penalty) is more cost-effective than repaying it within the selected tenure. Finally, opt for account foreclosure as soon as the loan lock-in period is over if any. This way, you will attract fewer penalties.
3. Consider balance transfer
A personal loan balance transfer is the best way to repay existing loans at a lower interest rate quickly. This option is popular among borrowers because it allows them to switch to a lender who levies a relatively lower interest rate on the borrowed sum and offers better repayment terms.
Additionally, this feature helps borrowers access a higher loan amount at affordable interest rates. However, borrowers can avail such benefits given they have a high credit score, a clean credit history, and a record of repaying EMIs on time.
However, make sure that the lender you choose levies an interest rate lower than what you are currently paying on your loan. Additionally, before opting for such a measure, make sure to find out the fees of loan foreclosure from your current lender.
If switching lenders costs you more than what you would pay by the end of borrowing tenure, a balance transfer may not suit your requirements. Talk to us about personal loan balance transfer and accompanying charges.
4. Use returns on investment
If you hold investments, you can utilise their returns to repay your personal loan before the end of the tenure. This is one of the best ways to utilise the extra income to lower the loan burden without straining finances.
Borrowers who earned a bonus can use the money to prepay a part of their debt. Subsequently, they can readjust the remaining tenure and arrange to repay the outstanding amount faster than the scheduled tenure.
These are among the top ways to repay existing personal loans faster. However, if you wish to pay off personal loans faster, you should consider following some debt management tips.
For example, set an auto-debit option or ECS facility to ensure you never miss out on the EMI payment date. Also, pay on time to avoid penalties and bounce charges that could increase your cost of borrowing. You could also consider negotiating with the lender to avail of better payment terms.
BACK TO BLOG
