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5 Ways To Effectively Repay Your Existing Loan

  • Highlights

  • Use your savings account to pay off the loan

  • Reduce the tenor of the loan if possible

  • Consider a loan against property to consolidate debts

  • Make prepayments from time to time

Understanding how to repay your existing loan smartly willnot only save you valuable time, but it will also help you save a greater portion of your hard-earned money.By reviewing your financial standing, you can choose from a number of routes to pay off your loans. Doing this will reduce your debt obligation, improve your credit score, and allow you to build your financial stability in a significant manner.
Here’s how to repay your existing loans or debts with ease.

Repay loans with your savings

If you’re considering repaying your outstanding loan, the first source you’d look at is your savings account. You can even use your savings to foreclose the loan, but you will need to have a sizeable amount of savings to do this.A good way to start clearing your debts is to focus on the loan with the highest interest.

Debt consolidation

This is another smart way to take care of your on-going debt. If you have several loans to your name, the interest rates will pile up and become expensive and time-consuming to

manage. To streamline repayment and make it more affordable, you can consolidate all your debt into a single loan. With the Loan Against Property, for example, you can avail a loan of upto Rs.5 crore.If you opt for a secured loan, you can make the most of a high loan amount, a low interest rate, and long tenor. This combination gives you the funds you need and helps you consolidate all your debt into one monthly payment while keeping costs low.You can also use the Flexi Loan facility, wherein you can borrow and repay funds as and when you wish to. Since you only have to pay interest on what you use, this is a cost-effective option.

Reduce the tenor when possible

If you have a loan with a long tenor, such as a home loan, you can reduce the tenor each time your income increases. This means that when you get your yearly appraisal, you can reduce the tenor by a few months. This will increase your EMI marginally but will reduce the overall interest your pay on your loan. As a result, you will slowly but steadily be able to repay the loan in a cost-effective manner.

Making extra payments to clear the loan early

Another thing that you can do is make part-prepayments towards your loan apart from paying the usual EMIs. This payment goes towards the principal of your loan. As the principal amount reduces, the interest amount will be lower too. Not only will this make your loan more affordable as time goes by, it will also allow you to repay your loan in a shorter time frame. But, ensure that your loan doesn’t come with hefty prepayment charges or penalties to be able to make the most of this option.

Additional Read: How is a loan against property processed?

So, if you have existing debt that is weighing on your mind, deploy these strategies to make repayment easy and stress-free.

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