What is loan repayment and types of loan repayment methods

Read on to know more about loan repayment and the types of personal loan repayment options.
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5 min read
21 Mar 2023

When you borrow any type of loan, you’re agreeing to repay the lender within a specific tenure. Failing to do so, you’ll have to pay additional fees on over and above the outstanding balance. Based on the loan type, there are several loan repayment methods. It’s important to know about all the loan repayment methods in detail.

What is loan repayment?

Loan repayment is the act of settling an amount borrowed from a lender along with the applicable interest amount. Usually, the repayment method includes a scheduled process in the form of equated monthly instalments (EMIs). Such instalments usually include both the principal and interest components, which need to be paid within a fixed tenure.

What are the types of loan repayment?

1. EMIs

EMI stands for equated monthly instalments. It's a payment made by a borrower to a lender every month at a specified date. The EMI amount remains the same throughout the loan tenure.

Bajaj Finserv allows customers to repay the personal loan EMIs through part-prepayment and loan foreclosure facilities.

  • Part-prepayment

Part-prepayment is a facility where you pay back a portion of your loan that is more than one EMI. This is a simple way to save on your interest payable. Your part-prepayment amount gets deducted from your principal outstanding as on the month of making the prepayment. You can choose a part-prepayment facility if you have extra cash, and you want to use it to pay off your loan ahead of time.

With a Bajaj Finserv Flexi Personal Loan, you can enjoy the benefit of making part-prepayment of the loan at no extra cost. Also, you can use the personal loan EMI calculator to know the instalment to be paid for your loan amount.

  • Foreclosure

The process of paying off the whole outstanding loan amount before the set due date is known as the foreclosure. A personal loan often has a specific lock-in period after which you can choose to foreclose the remaining debt and pay the entire loan amount. But we generally advise you to foreclose your loan amount when you have some surplus funds. 

With Bajaj Finserv Flexi Personal Loan, you can enjoy the benefit of making part-prepayment of the loan at no extra cost. The process of paying off the whole outstanding loan amount before the set due date is known as the foreclosure.


2. Bullet payment

In this mode of repayment, the interest has to be paid every month by the borrower. At the end of the tenure, the entire principal amount shall be repaid via a bullet payment. Unfortunately, this loan method is available for only a few credit products.

Before opting for a personal loan, know about the repayment type and opt for the one that benefits you the most.

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Frequently asked questions

How can I avoid foreclosure loan charges?

If you choose to foreclose your loan early, you have to pay the outstanding loan amount and applicable foreclosure charges. In most cases, you have to pay the applicable foreclosure charges. However, it depends on the kind of loan you’ve opted for and your lender. Therefore, it’s advised to read your loan agreement before you foreclose the loan.

Does foreclosure reduce interest?

Foreclosure is a process with which you repay your entire loan amount in one instalment. This helps in becoming debt-free faster. However, it’s advised to check the additional foreclosure charges to understand if you’re saving anything on the total repayment amount.

Can foreclosure have an effect on your CIBIL Score?

Foreclosure might affect the borrower's CIBIL Score.

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