A personal loan can be valuable for multiple purposes, including weddings and vacations. Several banks in India are offering personal loans at favorable terms, and the Bank of Baroda is undoubtedly one of them. The eligibility criteria are also quite flexible so that borrowers don’t struggle too much to acquire funds.
In case your financial status improves significantly a few months after getting the loan, you can repay it faster. It will relieve you from financial burden and also improve your credit score considerably. A few methods to pay back your personal loan faster are as follows:
1. Choose a Short Tenure
If you wish to repay your personal loan faster, you can choose one with a short tenure. But you should understand that a shorter tenure will mean higher monthly payments. Some borrowers are looking for a longer tenure even when they can repay a loan within a short span.
But choosing a longer tenure will mean higher interest rates. Since the interest on a loan is calculated on a per-annum basis, the amount that you repay will be higher. The monthly EMIs will be higher with short tenure, but the interest accumulated will be lower.
2. Examine All Your Debts
When you decide to reduce your financial burden, you should start by evaluating all your existing debts. Consider the amount that you have paid to figure out how much you exactly owe. It will help you build a repayment strategy to pay off a personal loan faster.
Suppose you have other loans apart from a personal loan. It makes sense to repay your short-term loans faster than the ones with a long-term commitment, like a personal loan. If you focus on paying long-term loans faster, you might default on the short-term ones and taint your credit history.
3. Round Up Your Monthly EMIs
Several people have personal loans with an EMI amount that’s decimal instead of a whole number. Paying off your monthly personal loan EMIs in round figures is a significant decision. You might think it won’t create any difference, but that’s not true.
A small contribution will also help you close your debts faster, Suppose your monthly EMI is Rs 3,375.30, but you are paying Rs 3500. The extra amount will have a huge impact when added over a few months.
4. Use Extra Funds to Make Larger Payments
Did you get a huge bonus at work or find an extra source of income? You can always use the extra funds to repay your personal loan. You might be tempted to use the extra funds to go on a vacation or spend it somewhere else.
But saving it to repay your loan will actually work in your favor. You will be able to reduce your debt faster and get financial relief. You can also use your savings to repay your personal loan and start saving once again with a clear mind.
Prepaying your personal loan will offer you multiple benefits. However, you should know that several lenders charge a prepayment or foreclosure charge. Your loan agreement might also have other terms and conditions for prepayment or foreclosure.
You should either choose a lender with zero foreclosure or prepayment charges or someone who allows you to close it after a certain point. Arrange the required documents to close your personal loan faster. Always remember to collect certain documents from your lender as proof of repayment.