Repaying your instant loan on time can help build your credit profile. Making that EMI payment on time not only saves you from the penalty but also has many other benefits, including improvement in your credit score, better interest rates, higher loan amount, lower insurance premiums and much more.
Hence, it is very important to sketch your repayment plan before applying for an instant loan. Also, since there are many lenders in the market offering you quick personal loans, you must compare the different features offered by these lenders including the ease of repayment.
When you avail a loan through a loan app, you get the option of auto-pay or self-pay. The app also sends timely reminders and notifications to prevent you from missing out on an EMI. Read on to know more about instant loan repayments.
Strategies to Pay off Your Loan Faster
Repaying your loan faster can help you increase your eligibility for a new loan. It also reduces your monthly obligation and allows you to manage your money in a better way. Plus, repaying your loan sooner may help you save on the interest payout. Thus, there are many benefits to repaying your loan sooner.
Here are some proven strategies that can help you repay your loan faster –
- Review your outstanding debt
You must know your exact remaining debt amount before planning to pay it off. Evaluate all your recent payments and the due amount. Then, record all your other monthly obligations, such as your home loan EMI, insurance premiums, household expenses, and credit card balances.
You can only create a successful repayment strategy if you have a thorough understanding of your financial situation. Understanding how much you owe can help sketch a practical repayment plan.
- Understand your ability to repay
You must assess your ability to repay the debt after knowing the loan’s outstanding balance. Analyse your present financial obligations. Make an estimate of all your expenses and determine how much you can put towards loan repayment each month.
Find out if there is a way to put some extra money towards the repayment of your instant loan. Limiting your monthly spending or finding a new source of income can help.
- Foreclosing your loan
Foreclosure of an instant loan is a common repayment strategy. However, you must know that foreclosure of a loan may attract additional charges. In addition to that, not all lenders allow the foreclosure. There are also certain terms like completing a specific number of EMIs before opting for foreclosure.
Also, foreclosing your loan would make sense during the early tenure of your loan. But it does not make much difference in terms of saving on the interest payouts if you foreclose your loan just a few months before the loan tenure. That’s why it is important to select the right tenure when availing a loan. Using a loan EMI calculator available on the loan app can help you select the right loan tenure.
- Debt consolidation
If you have several obligations, including personal loans, you can find it difficult to make timely payments on your monthly EMIs. Getting a debt consolidation loan is important to ensure that you do not fall behind on your personal loan payments too frequently.
With a debt consolidation loan, you can combine all of your debts into a single entity. This results in a convenient single monthly payment at a fixed interest rate instead of making many repayments at different rates.
- Balance transfer
The cost of a loan is significantly influenced by the interest rate charged. If you have availed a loan at high-interest rate, then you can either try to negotiate with your lender to offer you a better interest rate or opt for a balance transfer. Do note that the balance transfer process also incurs additional fees. So, make sure your saving on the interest payout is much more than the charges of a balance transfer.
Balance transfers do not free you from the burden of repayment. But it allows you to restructure your repayment plan which can make your loan management easy. A reduced interest rate also means a lesser EMI burden.
- Never miss an EMI
Most importantly, be sure that you never skip your loan EMI payment. Use the auto-debit / ECS option that most lenders provide. Always verify that your bank account has enough money to handle the payment. Any missed EMI payments will result in a penalty.
Conclusion
An instant loan is a very useful debt tool that can help you in desperate times. It is easy and convenient avail a quick loan through a loan app. But before signing the papers you must understand the importance of loan repayment.
With the above-discussed strategies, you can repay your instant loan faster which can relieve you from the burden of debt, improve your eligibility for a new loan, and improve your credit score significantly.
