5 Simple Ways to Repay Your Loans Quickly

However, not all loans are 'bad loans', and you cannot avoid certain types of loans. For example, a home loan and an education loan are essential loans. These loans are generally considered 'good loans' because they actually help you to manage your financial requirements. At the same time, availing of personal loans and excessive use of credit cards and credit apps are considered 'bad loans' as they can create a debt burden that you might struggle to pay.

Whether the loan is good or bad and whether you are in a debt trap or not, every borrower wishes to clear off their loans as soon as possible and live a debt-free life. This article enumerates 5 simple ways to repay your loans quickly:

1. Find the Loans That You Can Prepay or Foreclose:

Knowing your total debt and its tenure is the first step toward overcoming a debt burden. List down all your loans, including credit card payments, and make a total calculation to know how much you owe. Now, assess your income and savings to see how you can manage the repayment in the shortest duration. While assessing your debts, check for old loans with higher rates of interest that qualify for prepayment or foreclosure. Make sure you check the prepayment and foreclosure charges before deciding on the loans to be cleared off first. If the prepayment/foreclosure charges are very high, it does not make sense to opt for the prepayment/foreclosure as you might end up paying higher than you would on a regular repayment.

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2. Opt for Debt Consolidation:

Debt Consolidation is an act of taking out a new secured or unsecured loan to pay multiple debts. It helps you to manage your debt and lower your financial burden. Debt Consolidation Loan is refinancing your existing debt obligations. So it basically allows you to take a new loan to combine all your existing loans for better terms, such as a lower rate of interest, longer loan tenure, etc.

Consolidating all your loans can decrease your interest costs which are going to help you to pay the loan quickly. It enables you to repay your existing multiple small loans by taking one large loan with favourable loan terms. An individual can have several loans running, such as an educational loan, personal loan, credit card dues, etc. By availing of a debt consolidation loan, you can pay off these existing loans and continue with a single loan. The most important benefits of consolidating your debts are - you have only one Loan to pay EMIs for, and you usually have to pay a lower rate of interest as compared to your existing loans.

3. Negotiate the Loan Terms:

There are some types of large-amount loans which you cannot avoid, such as education loans and home loans, unless you have huge investments made specifically for those expenses. Although the rates of interest on such loans are comparatively lower than other types of loans, the loan is huge, and the tenure is typically longer. As the credit rule says, the longer the loan tenure, the more interest you have to pay. Hence, it is a good idea to minimise the loan tenure as much as you can to get rid of the debt earlier. However, if it is not possible, then try to negotiate the loan terms with the lender. If you have been an old customer with good credit history with them, then they can consider your request and may lower your interest rate or loan tenure.

4. Use Your Investments:

While using your extra savings is the first feasible option to clear off the loans, it might not be the right option if you do not have a sizeable amount of savings. In that case, you can consider using your investments to repay the debt. Selling assets like real estate property, gold, mutual funds, etc., could hurt emotionally, but it is a wise choice to liquidate them in times of need as it is the ultimate purpose of investing in them. There is no point in keeping the assets while you are in a debt trap that seems impossible to come out of it. But, if the asset is something your family or you are emotionally attached to, it is advisable to consider taking a Loan Against the Asset. Since these loans are backed up by collateral and the rate of interest is lower than unsecured loans, you can consolidate your debts at a lower rate of interest. However, keep in mind that the lender holds the right to sell your asset to recover the dues if you are unable to pay a few EMIs on time or default on the repayment.

5. Repay on Time:

While prepaying and foreclosing some of your loans faster, it is important to pay attention to your other loans and ensure you will be able to make timely repayments. Not paying your EMIs or dues on time leads to debt accumulation, and it can attract late payment charges. To avoid building up the interest component and penalties, make sure that you pay all the dues on time. If you are recklessly using your credit cards, then you might get tempted to pay the only minimum amount due. However, paying only the minimum amount will increase the interest component, and you will end up paying a much higher amount. Hence, it is essential that you timely pay your dues in full. Also, remember that not paying your dues on time can negatively impact your credit score.

To conclude:

To avoid the financial burden of huge loans and debt traps, it is crucial to improve your financial knowledge and control your temptations to splurge on credit. Financially literate and disciplined individuals make wise choices. Therefore, if you are unable to manage your finances on your own, it is advisable to take professional help or enrol for financial planning courses. PersonalFN's exclusive new certificate e-course, the "Certified Family Guardian". This e-course is truly empowering, separated into eight modules with 24 extensive videos that enhance your financial literacy and assist you in becoming your own financial planner with the help of its premium tools. You can equip yourself with financial knowledge under this course and be your family's financial guardian that makes informed financial decisions for a secure financial future.

Warm Regards,
Ketki Jadhav
Content Writer