Start with the Most Expensive Personal Loan First
This strategy will not only help you become debt-free faster but also bring you lasting peace of mind and motivate you further. Also, you would be left with more cash to make other repayments. Repaying the bigger chunk first reduces the total amount of interest you pay and also decreases your personal loan tenure.
Increase You Repayments with Every Raise
If your personal loan comes with a variable interest rate, you should be able to change your repayment amounts. If you can, rework your budget to create some extra room to raise your monthly repayment because the lesser you owe, the more you save in personal loan interest.
Double the Frequency of Your Repayments
If your personal loan EMI allows you to keep some extra cash every month, you can not only increase your repayment amount but also the frequency of your repayments.
If you repay every fortnight rather than repaying every month, you end up paying extra for two weeks as there are 26 fortnights in every year and this will make a massive difference down the line.
Budget and Cut Back Where Possible
Budgeting helps schedule your expenses and reallocate your funds to pay off your personal loan faster while enabling you to cut down on all unnecessary expenses. By keeping an accurate record of your earnings and expenses, you would be in a better position to knock over the outstanding balance sooner.
Round Up Your Personal Loan EMIs
Rounding up your EMI payments will help you repay more. For instance, if your personal loan payment is Rs. 1725.12 every month, you should round it up to Rs. 2000 as this small amount is easy to set aside but will make a big difference eventually by saving your interest money and shortening the loan tenure. So, if you cannot increase the repayment frequency, at least raise the amount.
Go the Extra Mile with One Extra Payment
Squeeze in one big additional payment if you ever get some extra cash through a tax refund or a festival bonus. Whenever you have more money in hand, repay in advance to enjoy EMI-free months later.
The Pros of Paying Off Early
Apart from not having to set money aside for monthly payments, the extra cash can be used to save for your retirement, make home improvements, enjoy a vacation, buy consumer durables online, or pay off other small debts.
So whether you are repaying a personal loan or about to apply for a personal loan, you can follow these tips to become debt-free faster.
If you are stuck with a personal loan that has a higher interest rate, you can consider switching to MoneyTap’s personal line of credit. It is an amazing personal loan with a credit limit that is available to you for a lifetime.
With a MoneyTap personal loan, your outstanding balance is recharged every time you repay your borrowed amount, so you will never run out of cash.
Also, unlike traditional personal loans that have prepayment penalties, MoneyTap’s personal line of credit allows you to prepay your loan without inviting any extra charges.
So switch to MoneyTap’s personal line of credit and enjoy the best of both worlds – where you will not only save on interest but also get instant access to funds whenever you need them.
Author bio
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India's first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life's mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.
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