Repaying your dues earlier can be beneficial as it helps you avoid payment defaults and accumulation of debt. Earlier repayment options such as part prepayment also offer you several benefits, such as reduced EMI amount as well as interest rates. It can also help you lower your expenditures and the financial burden on your pocket. With earlier repayments, you can also reduce your loan tenor and close your credit account faster.
Besides, it also helps you maintain a healthy credit score which secures the chances of availing further advances. Timely repayment of debts is one of the most crucial aspects of building one’s credit score, as it shows that a borrower has the financial stability to meet their obligations as well as repay the debt without any issue.
Let’s take a look at some of the ways to repay a loan or debt earlier.
- Debt consolidation
You can opt for debt consolidation that helps manage finances better in case you already have several outstanding lines of credit. With debt consolidation, you can pay the outstanding due of all other existing advances and make repayments towards the EMI of one single loan. Besides, the interest rate for a debt consolidation loan is comparatively lower that helps in lowering your burden on your pocket.
- Pre or part payments
Another effective tip on how to repay the loan faster is by choosing pre or part payments. With part payments, you pay the principal amount and reduce the EMIs for the remaining tenor.
Furthermore, most lenders offer a convenient method for prepayment. For example, you can prepay your loan against property on the official website of your lender by sharing minimal details.
- Balance transfer
Balance transfer facilities are an easy tip on how to repay the loan faster as it enables you to transfer your outstanding balance from your existing lender to a new financial company that offers lower interest rates. The EMIs of advances at a minimal interest rate is affordable and does not put a burden on your pocket. Inexpensive EMIs make the repayment process comfortable, and you can make several prepayments depending on your financial stability. However, the interest portion of your EMI stays higher than the principal component at the initial stages of the loan tenor. Hence, you should opt for a balance transfer when both the components are at balance to save more money.
NBFCs like Bajaj Finserv offer such balance transfer facilities on their advances, including secured credits such as a Loan Against Property. On their property loan, you can also enjoy attractive interest rates, the prolonged tenor of up to 20 years, a substantial loan amount of up to Rs. 3.5 Crore, online account access, instant approval, etc.
This NBFC also brings you pre-approved offers that are available on several financial products such as loans against property, professional loans, home loans, personal loans, business loans, etc. You can take a look at your pre-approved offer by sharing minimum details like your name and phone number.
- Reduce the tenor
Another tip on how to repay a loan is to reduce the loan tenor. Additionally, shorter tenor attracts lower interest rates that reduce the burden on your monthly budget and also the total cost of your loan is reduced. Nevertheless, the EMIs can get higher if you opt for a shorter tenor.
For example, If the loan amount is Rs. 30 Lakh and the loan tenor is 18 years at an interest rate of 8%, the EMI is calculated to be Rs. 26,249. On the other hand, if you reduce the loan tenor to 10 years, the EMI amount will be Rs. 36,398.
Thus, it is advisable that you analyze your finances and choose a shorter tenor to effectively repay your existing loan if you hold a stable source of income.
Now that you know how to repay a loan earlier, you can choose any of the above ways to make faster repayments. Besides, while you avail advances do make sure that you choose to credit with a lower interest rate to keep the repayments within your monthly budget.