How to Make Advance Payment for Unsecured Loan?

Managing finances effectively is essential, especially when dealing with loans. One way to optimise your loan repayment strategy is through an unsecured loan advance payment. This approach not only helps you save on interest but also reduces your financial burden over time.

What is unsecured loan advance payment?

An unsecured loan advance payment refers to the process of pre-paying one or more equated monthly instalments (EMIs) of your loan before their scheduled due dates. Unlike secured loans, unsecured loans do not require collateral, and advance payments can help borrowers reduce their overall loan tenure or interest outgo.

For instance, if you have a personal loan with a tenure of 5 years and decide to pre-pay 3 EMIs upfront, you can reduce your outstanding loan balance, which in turn lowers the total interest payable over the loan term. This can be particularly beneficial if you have surplus funds and want to minimise your financial liabilities.

Benefits of unsecured loan advance payment:

• Interest savings: By reducing the principal amount earlier, you can save on the interest accrued over time.
• Shorter loan tenure: Advance payments can help you close your loan faster, giving you financial freedom sooner.
• Improved credit score: Timely and advance payments reflect positively on your credit profile, showcasing responsible financial behaviour.
• Flexibility: Bajaj Finserv allows you to make partial or full advance payments as per your financial convenience.

How much can you save? (With calculator)

The amount you can save through an unsecured loan advance payment depends on several factors, including your loan amount, interest rate, tenure, and the number of EMIs you pre-pay.

Factors influencing savings:

1. Loan tenure: The longer the tenure, the higher the interest savings from advance payments.
2. Outstanding principal: Pre-paying when the principal amount is higher results in greater savings.
3. Interest rate: Loans with higher interest rates offer more significant savings through advance payments.

Use Bajaj Finserv’s loan savings calculator

To calculate your potential savings, you can use the Bajaj Finserv loan savings calculator available on their website or app. Here is how you can use it:

1. Enter your loan amount, interest rate, and tenure.
2. Input the number of EMIs you wish to pre-pay.
3. The calculator will display your total interest savings and revised loan schedule.

Example:
Let us assume you have a personal loan of Rs. 5,00,000 with a 12% annual interest rate and a tenure of 5 years. If you decide to pre-pay 3 EMIs (each Rs. 11,122), you could save approximately Rs. 15,000 in interest over the loan term.

Making advance payments is a simple yet effective way to reduce your financial burden. To get started, log in to the Bajaj Finserv Service Portal with your registered mobile number and access your loan account details.

Advance payments can have a positive impact on your CIBIL score and improve your overall creditworthiness. Here is how:

Improved credit score

When you make advance payments, your loan liability decreases, and this gets reported to credit bureaus. A lower outstanding balance and timely payments reflect positively on your credit report, boosting your CIBIL score.

Better eligibility for future loans

A higher credit score makes you a more attractive borrower for lenders. This means you may qualify for loans with better terms, such as lower interest rates or higher loan amounts, in the future.

Impact on EMI schedule

While advance payments can reduce your loan tenure or interest outgo, they do not eliminate the need for regular EMIs. It is crucial to continue paying your remaining EMIs on time to avoid penalties or adverse effects on your credit profile.

Note: Missing EMIs after making advance payments can lead to penalties and may impact your CIBIL score negatively. Always ensure you have a clear repayment plan in place.