Personal loans are the simplest ways to raise funds for urgent needs. You can take a personal loan to buy home appliances, medical emergencies, holiday, or other needs. For a personal loan, you need not define a purpose. As personal loans are available without any collateral security, banks or financial institutions charge a high rate of interest.
As personal loan rates are high, even the EMIs are expensive as compared to other loans. Since no assets are pledged, financial institutions consider several other factors before disbursing a loan. To be eligible for a personal loan, the borrower must have regular income, a good credit score, and healthy bank statements. The maximum tenure for a personal loan is five years. The borrowers must try to repay personal loans quickly to be debt-free. To achieve financial freedom, a borrower can opt for several solutions. After understanding and evaluating different ways, a borrower canRepaying Personal Loans EMI Faster: 6 Tips choose the best method of repayment that matches his/her financial condition.
Simple tips to repay your personal loans quickly
1) Pre-pay your Personal Loans
Personal loans are usually taken for emergency need of money. If you have limited funds, you can pay your monthly instalment sincerely. However, if you find yourself with a bit more money at your disposal, it is better to be debt-free. After utilizing the money for your immediate needs, you can make good use of the funds lying in your account. Rather than reinvesting the same amount, it is sensible to pre-pay your personal loan. Many banks do not levy prepayment charges on personal loan. Make sure you take a personal loan from a bank where there are no or very low pre-payment charges. By making a pre-payment, you can save interest payments on the principal amount.
2) Take a top-up Home Loan
In case you already have a running home loan, you can take a top-up on your home loan to repay your personal loans. As explained earlier, personal loan interest rates can be high, whereas the interest on home loan is always lower. Instead of having many loan accounts, it is better to repay your other loans with a top-up home loan available at lower rate of interest.
3) Balance Transfer
Balance transfer is one of the most popular options available to borrowers to repay loans at a lower rate of interest. Interest rates fluctuate all the time. If you have an option to transfer your personal loan account to a new lender charging lower rate of interest, you can save a lot of money and repay it early. You can avail this opportunity only when you have a good credit score. Lenders are willing to offer affordable rate of interest and flexible repayment tenures to credible and reputed borrowers. You can compare the different interest rates of lenders using a simple personal loan calculator online.
4) Debt Consolidation Loans
Multiple debts is very risky choice for a borrower. Rather than having multiple loan accounts and paying high rates of interest, you can opt for a single debt consolidation loan. Instead of making several repayments on different dates, it is convenient to pay a specified amount at interest rate monthly on a fixed date. With debt consolidation, it becomes easier to manage your money. Many borrowers make mistakes and burden themselves with several loan accounts. Later on, it becomes frustrating to manage your finances and may lead to default in payments. In case you fail to pay, it adversely impacts your credit score. Instead, opt for deb consolidation to maintain your credit score and save money.
5) Repay loans with the high rate of interest first
Prioritizing your debt is necessary. A smart borrower knows how to manage his finances and repay loans as soon as possible. In case your personal loan rate is quite high compared to your home loan/car loan rate, it is better to repay your personal loan quickly to save money. Generally, borrowers do not know how to route their money, and it leads to a debt trap. Sometimes, a borrower always remains under debt due to mismanagement of finances. Hence, it is good to prioritize your debt and repay your higher interest loan amounts as quickly as possible.
6) Saving is the best habit
You many find several ways to repay your loan quickly but the habit of saving can never be ruled out. To go debt-free, saving is the first rule. You must plan and manage your finances in such a way that you save at least 10% of your monthly income. You should sensible manage your credit card spends, and other expenses to save maximum money.