Paying off your loan ahead of schedule can help lessen financial burden.
Repaying a loan ahead of schedule requires careful planning and organised financial management; here are key tips to repay your loan faster
Repaying loans timely is the most important aspect of financial discipline, which keeps your credit report in good shape. A lot of borrowers want to repay the loan even before the schedule. Repaying a loan ahead of schedule requires careful planning and organised financial management. Here are key tips to repay your loan faster.
Sidharth Vishwanathan, chief risk officer (CRO) at KreditBee, said early debt clearance is achievable, offering financial freedom and peace of mind. He suggested some tips:
Debt consolidation: If you have multiple loans, the interest rate will become expensive and time-consuming, thereby making it tough to manage financially. Combine all your debt into a single amount to ensure you pay only one loan amount every month at one fixed rate of interest.
Refinancing: This option offers the straightforward choice of moving to a different lender offering a more competitive interest rate. By transferring the entire outstanding principal loan amount to another home loan finance company, you can secure a lower interest rate or access to additional funds on the original loan amount.
Prepay the principal amount: By making a lump sum repayment towards the principal amount, you can reduce the EMI and the tenure of your loan repayment. The only concern with prepayment is that you must ensure that there are no heavy charges levied towards the pre-payment of the principal.
Make additional payments: If you can manage to pay, make bigger payments to reduce the principal quickly and lessen the total payout time. By reducing the principal amount, you are lessening the duration of the loan timeframe and the interest accumulated.
Increase your EMI percentage: It is also recommended that boosting your EMIs annually by a set percentage based on your saving capacity can significantly help reduce the tenure of your loan repayment. The pace of repayment can be adjusted to suit individual financial circumstances.
Paying off your loan ahead of schedule can help lessen financial burden. However, one must be mindful of their own financial situation. Along with that, it is also important to be careful and cognisant of the fees, penalties and other charges involved in early debt closure.
