In today’s world, where everything moves at such a fast pace, people rely heavily on personal loans to help them with their financial needs. Personal loans can help people pay for expensive purchases, cover unexpected expenses, consolidate debts and more. With the countless applications and ease of access in today’s digital age, getting a personal loan has never been easier. However, people often overlook the importance of repaying their loans promptly, and the interest accrued on these loans can significantly affect their finances in the long run. In this article, we will discuss ten tips for repaying personal loans faster and saving interest along the way, with a subtle pitch for the Bajaj Finserv app.
Tip 1: Create a Budget
The first and most crucial step in repaying personal loans is creating a budget. Creating a budget helps you see how much money you have coming in and going out each month- including your instalment payments. By setting clear spending limits, you can redirect more funds to repay your loan promptly. A well-detailed budget also helps you identify any areas where you can cut back on expenses and tweak your plan to create a more significant difference in your income-expense ratio, allowing you to save and repay quickly.
Tip 2: Pay More Than the Minimum Monthly Payment
While it may seem tempting to pay only the minimum amount due on your loan each month, it is not a wise long-term decision. Paying only the minimum means that it will take longer to repay your loan, and you will end up paying more interest in the long run. By paying extra amounts each month (whenever you can), you will significantly shorten the loan repayment period and help shave off a considerable chunk of the interest that would have accumulated. Creating a Debt repayment plan can also help by putting a fixed sum of money aside for repayment at the beginning, thus removing any temptations to spend the money elsewhere.
Tip 3: Look out for Prepayment Charges
A personal loan includes substantial interest rates that actively contribute to the cost of the loan. When repaying a personal loan, it is important to look out for prepayment fees before making any early payments. Prepayment fees are fees charged by the lender for early repayment, and they can be a significant hindrance in repaying loans quickly. Some lenders do not levy prepayment fees, and they are the ones to be considered while looking for personal loans.
Tip 4: Make Bi-Weekly Payments
If you find it challenging to make extra-large payments every month, making bi-weekly payments can also help. Bi-weekly payments mean paying half of the monthly instalment every two weeks. This method does not lower the amount of interest rate charged, but it allows you to make two extra payments a year, equivalent to a full payment, or one additional instalment. Thus, it cuts down on the length of the loan and reduces the total amount of interest charged over the loan term.
Tip 5: Consolidate Your Debt
Debt consolidation is the process of taking out one loan to pay off several others. Consistently repaying multiple loans can be challenging to manage, and the interest that accumulates over time tends to rise significantly. By consolidating your debts into one personal loan, you can lower the interest rate paid. Consolidation also means you only have one payment to worry about each month, making it easier to manage your finances.
Tip 6: Refinance to Lower the Interest Rate
If the interest rate on your current personal loan is too high, refinancing might be an option in the process of taking a new loan with lower interest rates to pay off the existing one. Refinancing with Bajaj Finserv ensures you receive lower interest rates and can also help you switch from a variable interest rate to a fixed one, providing critically needed stability while repaying your loans. Refinancing for a longer period also reduces your monthly payments, giving you room to budget your finances better.
Tip 7: Consider Saving Money to Make a Bulk Payment
Negotiating with the lender for a reduced interest rate is not always possible, making paying a lump sum a feasible option. When expecting a bonus, salary increase, or other sources of sudden income, it’s wise to save it to make bulk payments on your loan. A considerable chunk of the principal (usually around 20%) can be paid upfront, shortening the length of the loan while also reducing the amount of interest charged over time.
Tip 8: Round Up Your Payments
Rounding up your payment may seem like a small gesture in repaying personal loans; however, it can make a significant difference in the long run. Making payments that are slightly higher than the minimum each month can be beneficial as it can help you repay your loan faster and save interest over time.
Tip 9: Set up Auto-Payments
Setting up automated payments through your bank account or the lender’s online account can significantly reduce the stress and anxiety that comes with keeping track of every payment. Automated payments can create consistency and help avoid missed payments or late fees. An automated payment method also eliminates the possibility of spending the money allocated for your instalment payment elsewhere.
Tip 10: Use the Bajaj Finserv App for Easy Pay
Keeping track of all of your loans and payments can be a daunting task. To simplify your financial management needs, the Bajaj Finserv app provides a one-stop shop for all of your financial needs. With the app, you can keep track of loan status, pay your loans, calculate EMI, and schedule your payments from anywhere and at any time. The app also provides pre-approved loans to existing customers and requires minimum documentation, guaranteeing quick approval and disbursal. With the Bajaj Finance loan app, repaying personal loans has never been easier or more convenient.
Repaying personal loans as soon as possible is one of the best financial decisions anyone can make. With careful planning and proper budgeting, you can reduce the amount of interest charged on your loan, eventually saving significant amounts of money. Remember to use app for loan for efficient money management and repaying your loans faster. These tips are practical, and anyone can start implementing them today, irrespective of current or future investment or financial plans. Following these ten easy steps and a little bit of discipline and diligence in your finances will help keep you debt-free and set you on a path of financial stability for the future.