Most people now associate personal loans with daily existence. A personal loan is the simplest approach to fulfill your demands and make arrangements for unforeseen expenses, whether you’re buying equipment, going on vacation, starting a business, or covering other costs.
In recent times, getting a personal loan approved has become a much simpler process. You can easily get a personal loan with minimal documentation. Having said that, you need to have a precise understanding of how to repay your loan quickly. Planning your repayment strategy wisely not only saves valuable time but also improves your overall financial position.
Look At These Easy Ways to Repay Your Loan Faster
Foreclosing Your Loan
Personal loans are often used to meet short-term financial requirements. But a Personal Loan comes with an interest rate and a repayment tenure of 12 to 60 months. While it enables you to meet your immediate financial requirements, you are burdened with a financial commitment that requires you to pay an additional interest component on the principal amount borrowed. Also, you must adhere to the repayment period of 12 – 60 months.
The best way to get out of a loan is to foreclose it if you have enough funds to do so. This can be done as soon as the lock-in period of your loan is over. Even though you may incur penalty charges, prepayment of your loan saves on a lot of interest and certainly reduces your financial burden.
Make early repayments at higher interest rates
Remember that even if you meet the personal loan eligibility, it means getting a higher interest rate as compared to a home loan or car loan. While everyone agrees with the fact that personal loans are a necessary route when it comes to finances, they can also lead you to a debt trap if you are unable to pay them on time.
If you have other existing loans at lower interest rates, it makes a lot of sense to first pay off your loan which comes with a very high-interest rate. Prioritizing debt is also a smart way to ensure that you pay it off quickly.
Go for Debt Consolidation Loan
If you have multiple debts including personal loans, you may have to struggle to repay your monthly EMls on time. It is best to opt for a debt consolidation loan to ensure that you do not fall behind on your loan payments too often.
You can combine all your debts, including credit card debt, into a single entity with a debt consolidation loan. This results in a convenient single payment each month at a fixed interest rate, as opposed to making multiple payments at different interest rates. In fact, in most cases, you will pay a lower interest rate on your monthly instalment with a debt consolidation loan, which will make it easier for you to better manage your finances.
Personal Loan Balance Transfer
If you have a credit card with a significant spending limit, or you are unhappy with your current lender, you can also opt for a personal loan balance transfer to repay it quickly. Under this facility, your previous dues are completely closed. Also, you may get a higher loan amount approved at a more affordable interest rate.
This makes sense if you are paying a higher interest rate on your loan and your credit card service provider offers you the option to transfer it to a lower interest rate if you have a good credit score.
The most important thing is not to miss a single EMI payment on your loan. Opt for the auto-debit / ECS facility, which is provided by most lenders, and always ensure that your bank account is adequately funded to manage the payment. Any delay in paying the EMI will attract a penalty charge, and insufficient funds in your account will attract a bounce charge, making your loan more expensive.
What is the Pre-Payment Penalty on Pre-Closure of A Personal Loan?
If you close your loan earlier than expected, most banks charge a prepayment penalty. The amount of the penalty is calculated as a percentage based on the existing loan balance or the loss of interest to the lender due to pre-closure. Generally, the pre-payment penalty ranges between 2% and 5% of your loan amount. The exact fee may vary between lenders.
Remember that all the details regarding the prepayment penalty and the terms that apply to this penalty are described in detail in your loan agreement. Make sure you read all the agreements thoroughly before signing them.
There are two ways in which you can try to avoid paying the prepayment penalty. First, look for a lender that doesn’t charge a penalty for pre-closure. Second, choose a lender that allows you to pay off your loan penalty-free after a specific point in the tenure.
Also Read :- Pros And Cons Of Personal Loan Prepayment In India
What Are the Documents Required for Loan Pre-Closure?
Certain documents need to be exchanged between the lender and the borrower in case of loan pre-closure. Make sure you have all these documents with you as they are proof that you have repaid your loan.
Documents to be submitted to the lender
- KYC documents
- All relevant loan documents
- Bank details showing the EMI payments made so far.
- Prepayment details
- Documents to be collected from the lender
- Receipt of pre-close payment
- No Objection Certificate (NOC) for Personal Loan Closure
- Personal loan closure certificate
- Payment due certificate
- You may want to ask your lender for an accurate list of documents required as per their process.
- How to Apply for A Personal Loan?
- Read on to understand how to apply for a personal loan fromCredit success by checking your loan eligibility using our online calculator.
With a good CIBIL score, you are more likely to get a personal loan. Below are the steps to apply
Fill out the Application Form
Start by filling out the application form first. Ensure that the personal, employment and financial statements provided are accurate to the best of your knowledge. Your PAN and Aadhaar details will also be required to proceed to the next step.
Select Loan Amount
Enter the loan amount you require, as well as the repayment period that is convenient for you. Our Personal Loan EMI calculator will help you understand how you can choose a tenure so that your monthly EMI amount can be easily managed within your budget.
Submission of Documents
Your identity along with your financial status will need to be verified before your loan application can be approved or rejected. This helps to ascertain whether you meet the eligibility criteria. Documentation includes:
KYC documents
Proof of employment
Payslip
Bank details of your salary account for the last 6 months
Loan Amount Disbursed
Generally, Credit success disbursed the loan in a very short period. If the loan gets approved, the funds are disbursed in 24 to 72 working hours.
To Conclude
While it has become common practice to meet high-value consumption with the help of personal loans, it is also essential for the borrower to know how to repay his loan in simple and easy steps. Ultimately, the aim is to reduce your debt obligation while building your financial stability
