Tips to Repay Your Personal Loan Faster

Personal loans can help you achieve your dreams, manage your existing debts and deal with emergencies. Getting a personal loan is easy and convenient these days. With a simple online application, your loan gets disbursed within a few hours.

But the real challenge starts after you get the personal loan. Because now you have to repay the personal loan through monthly EMIs. If you miss out on any payment, then you face a penalty. And if you take too long to pay, then you pay high interest.

It’s better to repay the personal loan as soon as possible. This will reduce the interest and make you debt-free fast. In this blog, we will explore some personal loan repayment tips that will help you repay the loan faster.

Tips to Clear Personal Loan Faster

Personal loans carry high interest. Hence, it’s advisable to repay the personal loans as soon as possible. Here are some personal loan repayment tips which will help you clear the loan faster: –

1.   Make Extra Payments

In the initial months of your repayment, a major part of your EMI goes towards paying the principal amount. This is because your interest rate is considered on the outstanding principal amount. So, if possible, make extra payments.

This means paying an extra amount with EMI when possible. This will go to payment towards the principal amount. As a result, it will reduce your overall interest and help you repay the loan faster.

2.   Increase Your EMI

As your income increases, you can increase your EMI. This will help you to pay the principal amount faster. As a result, your interest gets reduced and the overall tenure of the loan gets shortened. Hence, you are able to repay the loan faster.

3.   Make Use of Bonuses and Incentives

Whenever you receive a lump sum amount like a bonus, incentives, or some income through side gigs, you can use it to make a personal loan repayment. You can use this amount to make part payments. As a result, your loan balance and interest will reduce. This will make you repay the personal loan early.

4.   Refinancing Your Existing Loan

The interest rates of person al loans are quite high compared to secured loans. As you are repaying this loan, your credit score improves. Hence, now you can get better loan deals at low interest rates.

You shall check various loan offers by various banks and go for the lower interest rate loans. This is defined as loan refinancing or balance transfer. This reduces your EMI. Or else you can keep the same EMI and get tenure reduced. In both ways, you pay off the loan faster.

5.   Choose Short Loan Tenure

The borrower has the freedom to choose the tenure of a personal loan. You can choose as per your convenience. But you should choose the loan tenure wisely, as it directly impacts the interest payment.

Moreover, a longer tenure gives you lower EMI, but it will lead to more interest payments. If you keep the shorter tenure, then you have to pay less interest and you repay the loan faster.

6.   Create a Budget and Stick to It

You should start creating a budget. You can do this by tracking your monthly expenses and income. This will give you an idea of where you can cut down expenses and spare that amount towards loan repayment.

It will also develop a discipline in you, and you will never miss out on any loan payments. It also makes you pay a larger amount towards loan repayment and hence reduces the principal amount. As a result, your personal loan repayment gets completed sooner.

Why Pay off a Personal Loan Quickly?

Paying off a personal loan early has a lot of benefits. Let’s go through them: –

1.   Savings of Money on Interest

One of the major benefits of early repayment of a personal loan is savings on interest cost. Longer tenure brings a higher interest cost on the loan. If you pay the personal loan faster than you pay less interest on the loan.

2.   Financial Freedom

Early loan repayment makes you debt-free. You can allocate these funds towards achieving financial goals. This will help you achieve financial freedom.

3.   Improved Credit Score

Early repayment of a personal loan will impact your credit score positively. It demonstrates responsible financial behaviour, and hence your credit score will improve. You will be able to get better loan offers.

4.   Peace of Mind

Debt can bring stress and affect your emotional well-being. Faster loan repayment relieves you from debt-related stress and gives you mental peace.

Conclusion

A personal loan helps you achieve goals and fulfil the need for finance during an emergency. But after your personal loan is disbursed, you shall ensure you pay it as soon as possible. Faster personal loan repayment has its own benefits. You pay less interest, your credit score improves, and you achieve mental peace by becoming debt-free.

You can make the loan repayment quicker by increasing the EMI, making extra payments, refinancing, and choosing a shorter tenure. One can also use bonuses and incentives for faster loan repayment. This will improve your financial well-being.