5 Simple Ways to Repay Your Personal Loan Quickly

Personal loans for most people have become synonymous with everyday life. Be it buying appliances, going on a holiday, starting a business or even meeting emergency expenses, personal loans are the easiest way to finance your needs and even the occasional indulgences.

In recent times, getting personal loans sanctioned has become a much more simplified process. For example, SMFG India Credit approves personal loans up to Rs. 25 lakhs online, with minimal documentation.

Having said that, you also need to have a precise understanding of how to repay your personal loan, quickly. Planning your repayment strategy smartly not only saves valuable time but also improves your overall financial standing.

Take a look at these 5 simple ways of how to repay your personal loan fast.

1. Foreclosing Your Personal Loan

Personal loans are often used to fulfil short-term financial deficits. But a personal loan comes with an interest rate and a repayment tenure of 12 to 60 months. Therefore, while you were able to meet your immediate financial requirements, you are laden with a financial burden that requires you to pay back an additional interest component on the principal amount borrowed. Plus, you will have to abide by a minimum of a 12 month period repayment tenure.

The best way out here is to foreclose your personal loan if you have sufficient funds to do so. This can be done as soon as your lock-in period of the loan is over. Even though you may have to pay a penalty charge, prepayment of your personal loan saves on a lot of interest and definitely lessens your financial burden.

2. Repay Quickly on a Higher Interest Rate

Remember that even if you meet the personal loan eligibility, getting one means attracting a higher interest rate than home or car loans. While everyone agrees to the fact that personal loans are a necessary route when it comes to financing, it can also lead you towards a debt trap if you are unable to repay it within the specified timelines.

If you have other existing loans on lower interest rates, it makes a lot of sense to repay your personal loan that comes with a much higher interest rate, first. Prioritising debt is also a smart way of ensuring that you repay it quickly.

3. Go in For Debt Consolidation Loans

You may struggle to repay your monthly EMIs on time if you have multiple debts including personal loans. To make sure that you do not lag behind in your personal loan payments too often, it is best to opt for a debt consolidation loan.

You can club all your loans, including credit card debts into a unified entity with a debt consolidation loan. As opposed to making several repayments on varying interest rates this results in a convenient single pay-out every month on a fixed interest rate. As a matter of fact, in most cases, you will be paying a lower interest rate with a debt consolidation loan on your monthly instalment making it easier for you to manage your finances better.

Must Read: How to Clear Overdue Payments with a Personal Loan?

4. Get A Home Loan Top-Up

If you have an existing home loan, you can take up a home loan top-up to cover any unexpected expenses with regards to home improvement instead of a personal loan. Home loans come with more economical interest rates in comparison to personal loans and even credit cards.

Not only does it help to consolidate your debt, but your monthly pay-out decreases too. Plus, you are servicing a single loan account rather than spreading out your debt across multiple loan platforms.

5. Personal Loan Balance Transfer

If you have a credit card with a significant spending limit, or are displeased with your current lender, you can even choose to go for a personal loan balance transfer as a mode of repaying it off quickly. Under this facility, your previous outstanding balance is completely closed. Plus, you may get a higher loan amount sanctioned at a more affordable interest rate.

This makes sense if you are paying a higher interest rate on your personal loan and your credit card service provider offers you the option to transfer it at a lower rate of interest. Having said that, this is only possible if you have a good credit score.

Most importantly, never miss a single EMI payment on your loan. Opt for the auto-debit / ECS facility which is offered by most lenders, and always make sure that your bank account is funded sufficiently so as to manage the payment. Any delay in paying an EMI will attract penalty charges, and lack of sufficient funds in your account will attract bounce charges, thereby making your loan more expensive.

What is the prepayment penalty applied to personal loan pre-closure?

For personal loan pre-closure, SMFG India Credit, like many other lenders, charges a pre-payment penalty of up to 7% of the loan amount. Borrowers who want to pay off their loan before the end of the term must pay this penalty. The penalty is intended to repay the lender for the interest that would have been received if the borrower had continued to make regular payments until the loan term ended. Borrowers must carefully read the terms and conditions of their loan agreement in order to fully understand the pre-payment penalty and other penalties that may apply. 

What are the documents required for loan pre-closure?

Borrowers must present specific documentation to their lender in order to commence loan pre-closure. The particular documents necessary may vary based on the type of loan and the lender's requirements; however, the following are some typically required documents:

1. Loan account number and details
2. Identification documentation, such as a passport or driver's license
3. Proof of address, such as a utility bill or rental agreement
4. Loan repayment plan
5. Statement of Payment History
6. Income documentation, such as payslips or tax returns

Borrowers should consult with their lender to understand the exact documentation needed for loan pre-closure and to verify that they have all essential documents before beginning the process.

How To Apply For A Personal Loan?

Whilst we are discussing how to repay your personal loan fast, there is no denying the fact that you may need one in the foreseeable future. Therefore, read further to understand how to apply for a personal loan from SMFG India Credit simply by checking your personal loan eligibility using our online calculator.

With a good CIBIL score, the probability of your getting a personal loan is higher.

Follow these steps when you make your application.

1. Fill Out the Application Form:
Start by filling out the application form first. Ensure that the personal, employment and financial details provided are accurate to the best of your knowledge. Your PAN and Aadhaar information will also be needed to proceed to the next step. 

2. Choose Loan Amount:
Enter the loan amount that you need, plus the tenure of repayment that is suitable that is convenient for you. Our personal loan EMI calculator will assist you to understand how you can select a tenure so that your monthly EMI amount can be easily managed within your budget.

Must Read: 5 Simple Ways to Choose the Right Personal Loan Tenure

3. Document Submission:
Your identity along with your financial status will need to be verified before we approve or reject your personal loan application. This helps ascertain if you meet the criteria for eligibility. Documentation includes:

• KYC documents
• Proof of employment
• Salary slips
• Bank statements for the last 6 months of your salary account

4. Loan Amount Disbursed:
Generally, SMFG India Credit takes between 24 hours to a few days to decide on your loan application post receipt of all relevant documents. If the loan is approved, the funds are disbursed in 24 to 72 working hours.

In Conclusion

While it has become the norm to meet high-value consumptions with the help of personal loans, it is also necessary for the borrower to be aware of how to repay your personal loan in simple and easy steps. Ultimately, the aim is to reduce your debt obligation whilst building your financial stability.

FAQs

How can I repay my personal loan fast?
Here are some ways to repay a personal loan faster:

1. Make larger payments than the minimum amount due.
2. Pay more frequently than the required monthly payments.
3. Make a lump-sum payment or pre-pay the loan.
4. Cut down on expenses to free up funds for loan repayment.
5. Consider refinancing or balance transfer options.

Can I repay my personal loan in 6 months?
Depending on the conditions of the loan agreement and the borrower's ability to make higher installments, it may be possible to repay a personal loan in 6 months. Nonetheless, it is critical to confirm with the lender that there are no pre-payment penalties or other expenses linked with early loan repayment.

What happens if I pay more than EMI?
You have the option of paying extra than the normal EMI. The surplus money will not only lower your outstanding debt but will also minimise your interest expense. Every year, you can pay one additional EMI (in addition to the standard amount of EMIs). This is a good strategy to shorten the term of your loan and lower your interest rate.

What happens if I miss 1 EMI?
Missing even one EMI (Equated Monthly Installment) might have serious implications. To begin, you may be charged a late payment fee or penalty. Second, it can have a negative impact on your credit score, affecting your capacity to receive future loans or credit. Eventually, missed payments can lead to legal action or loan default.

What happens when 3 EMI bounces?
Three EMIs (Equated Monthly Installments) that bounce can have severe repercussions. The lender may begin recovery procedures, which may include legal action or loan default. The borrower's credit score will also suffer, making future loans and credit more difficult to get. It is critical to speak with the lender and fix the problem as early as possible.

How many EMI can I skip?
It is not advisable to skip any EMI (Equated Monthly Installment), as this can have serious implications. It can lower your CIBIL score, too. Before skipping any EMI payments, it is critical to connect with the lender and seek their approval.

Can I pay 2 EMI in advance?
Yes, many lenders allow borrowers to pay up to two or three EMIs in advance (Equated Monthly Installments). Borrowers can minimize their outstanding principal and interest payable over the loan term by making advance payments. Nonetheless, it is critical to confirm with the lender that there are no prepayment penalties or fines.

How to reduce EMI by prepayment?
Borrowers might make additional payments towards their outstanding principal amount to decrease their EMI (Equated Monthly Installment). This reduces the total amount borrowed, which reduces the interest payable and, as a result, the EMI.

What are 5 ways to reduce EMI?
Following are the ways to suppress loan EMI:

1. Opt for a longer loan tenure
2. Increase down payment amount
3. Opt for a lower interest rate
4. Choose a lower loan amount
5. Negotiate with the lender for better terms and conditions.

Why is the personal loan interest rate so high?
Personal loans have higher interest rates than other forms of loans because they are unsecured, which means there is no collateral or asset to support the loan. As a result, the lender assumes greater risk, as represented in the higher interest rate.

How can I avoid interest on my personal loan?
A personal loan cannot be avoided because interest is a price levied by the lender for borrowing money. Borrowers can reduce their interest payments by making prepayments on the loan principal, obtaining a lower interest rate, or opting for a shorter loan term.