How to Reduce Your Personal Loan Burden?

A personal loan is a popular choice to finance any emergency situation because of the various benefits that it offers like easy processing, quick disbursal, minimum documentation, etc. Since a personal loan is an unsecured loan, the rate of interest is usually higher and hence the EMIs of a new personal loan and your existing loans (if any) might hamper your monthly budget.

Also, if you don’t repay the loans on time, your credit score might go down. Therefore, if you follow a few smart steps, you may be able to repay the loan without any inconvenience or stress. The following ways can help you to plan your repayment schedule wisely and without any default.

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There are two ways to go about paying off these loans:

1. Debt Snowball Method: Under this method, you will pay off the loan with smaller amount first. You can proceed to pay the larger ones with finally paying off the biggest loan in the end.

2. The Stack Method: Under this method, you will be paying the loan with higher interest rate first and the one with lower interest rate in the end. This way you can repay your loan faster.

Both the above methods are convenient for loan repayment. However, you will have to choose the perfect method according to your financial situation.

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Tips to Repay Your Personal Loan Faster

• Prepay your loan: You might not have planned a prepayment but if you have got a bonus or an increment or funds from any additional source, paying your personal loan before the tenure ends is always a smart decision
• Balance transfer: This method allows you to transfer your existing personal loan to another lender to get lower interest rate on the same loan. Therefore, if you are paying your EMIs on time and have a good credit history, you can transfer your high interest personal loan to a low interest loan and can reduce your EMIs
• Part- Prepayment: There are a few lenders who allow part-prepayment on a personal loan. Salary hike, savings, bonus, etc. can help you to make a part-prepayment on a personal loan and reduce your EMIs in future. However, part-prepayment might come with a small percentage of fee
• Debt- consolidation: If you have many loans or credit card bills and are paying multiple EMIs, you must be taking out a huge amount of income for repayment. To ease the situation and reduce your EMIs, you can take a personal loan for debt consolidation and can pay all the debts with a single EMI
• Home loan/Personal loan top- up: Top up loan facility is offered to you if you already have a home or personal loan from the bank. If you have a good credit score or repayment history, you can avail the top- up facility at lower interest rate and can use the facility to repay your existing debts
• Use your existing investments: You can also use your existing investments like PPF or insurance policy to repay your loan. However, these are your long term investments and should only be touched in case of an extreme emergency

The above points will help you to reduce the loan burden. However, you should never borrow more than you can repay for a stress-free repayment process.