Getting a loan can help with finances, but repaying it might seem tough. Paying off loans quickly saves money on interest and gives you financial freedom. Here are some tips to repay your loans faster.
Rounding up your monthly payment means paying a bit more than the exact amount due each month. For example: If your EMI is ₹18,700, you can round it up to ₹20,000. The additional ₹1,300 will go towards the principal.
Additional Principal Payment: When you pay more than your scheduled monthly amount, the extra money goes straight toward reducing the principal balance of your loan. This lowers the total amount of interest you have to pay because interest is calculated based on the principal.
Easy Implementation: This method is easy to add to your budget and won't greatly impact your finances.
What do you mean by Windfall? Unexpected sums of money like bonuses, tax refunds, or gifts. For example: If you receive a Diwali bonus of ₹50,000, use it to make an extra payment on your loan.
Lump Sum Payments: Using unexpected money to make lump sum payments can greatly lower your principal balance.
Interest Savings: Paying down the principal early in the loan term can save you a lot of money in interest.
Increasing your EMI amount whenever you receive a salary increment. For example: If your EMI is ₹15,000 and you receive a salary hike, increase your EMI to ₹17,000.
Faster Principal Reduction: Higher EMIs reduce the principal quicker.
Less Interest: Less principal means less interest, helping you save money and pay off the loan faster.
Making one extra EMI payment each year that means for example: If your monthly EMI is ₹25,000, making an extra payment of ₹25,000 once a year can significantly impact your loan duration.
Principal Reduction: Extra payment reduces the principal, which in turn reduces the total interest paid.
Shorter Loan Tenure: Making extra payments can shorten the overall loan term.
Cut back on unnecessary spending and use the extra money to pay off your loan. For example: Canceling a gym membership (not recommended but just for understanding the example) costing ₹1,500 per month and using that amount for loan repayment can contribute an extra ₹18,000 per year.
When you transfer a loan at a lower interest rate to pay off the existing loan. For example: If your current loan interest rate is 10% and you refinance at 8%, you save on interest costs.
Use money from your savings or sell investments to pay off your loan. For example: Using ₹1 lakh from your fixed deposit to make a lump sum payment can save you interest over the loan tenure.
Setting up automatic payments from your bank account to ensure timely EMI payments. For example: Set up an auto-debit for your EMI amount on your salary date. If you want to auto debit ask your lender to do so.
| Tips |
|---|
| Bi-Weekly Payments |
| Round-Up Payments |
| Utilize Windfalls |
| Increase EMI with Salary Hikes |
| Make One Extra Payment Annually |
| Cut Down on Unnecessary Expenses |
| Refinance Your Loan |
| Use Savings and Investments |
| Negotiate with Your Lender |
| Automate Your Payments |
Paying off loans faster can give you financial freedom and save you money on interest. You can achieve this by making payments every two weeks instead of monthly, using extra money from bonuses or gifts, and increasing your payments when you get a raise. Cutting back on unnecessary spending and using those savings to pay down your loan can also help. By following these strategies, you can manage your finances better and become debt-free sooner.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
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Yes, most lenders allow early loan repayment, but check for any prepayment penalties.
Extra payments reduce the principal amount, which lowers the interest burden and shortens the loan tenure.
Refinancing can be beneficial if you get a lower interest rate or better repayment terms.
Use windfalls like bonuses to make lump sum payments towards your loan.
Automating payments ensures timely payments, avoiding late fees and maintaining a consistent repayment schedule.
Using savings for loan repayment can reduce the principal and interest burden, but ensure you have enough funds for emergencies.
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