Borrowing money can be a step toward any number of goals, from getting the latest gadget or taking a vacation to covering an unexpected expense. So here’s the money, but as soon as you get it, your new priority becomes paying it back as quickly as possible. Paying off a loan early can save you a lot of money and give you a sense of freedom. But how do you pay off a ₹50,000 personal loan faster without feeling stressed?
Good thing you don’t have to be a money expert to accomplish it. So, you really do need to have a simple plan and a little bit of discipline. In this post, we will bring some simple and intelligent tips to help clear your loan early and become debt-free.
1. Make Extra Payments When You Can
This is the most powerful way to pay off your loan faster. Your monthly payment (EMI) is a fixed amount, but you can always pay more.
- Use Bonuses and Refunds: Did you get a bonus from your job or a tax refund? Instead of spending all of it, use a part of that money to make an extra payment on your loan. It’s called a “lump-sum payment,” and it can make a big dent in how much you owe on your loan.
- Add a Little More to Your EMI: If you can’t shell out a big lump sum, you could simply add an extra amount every month to your EMI. For instance, if your EMI is ₹2,500, make an effort to pay something like ₹2,700. The additional ₹200 is applied directly to your loan principal, so you pay it off sooner and, over the long term, save yourself a lot of interest.
Simple as it may sound, this move works because your extra payments are being applied directly to the amount you owe on the loan, not to the interest. That makes the size of your loan smaller, and so too will be the interest for the next month.
2. Increase Your EMI When Your Income Goes Up
As you work harder, your salary might go up. When this happens, a very smart thing to do is to increase your EMI.
- It’s a Painless Way to Pay More: Since you are already getting more money, you will not feel the pinch of paying a higher EMI. For a ₹50,000 personal loan, even a small increase in your EMI can make a big difference in how fast you pay it off.
- It Saves You a Lot of Money: The higher the EMI, the faster you will pay off your loan. The shorter the loan term (the amount of time it takes to pay back), the less interest you will pay overall. This is a fantastic way to use your excess income to get rid of debt and save at the same time.
3. Consolidate Your Debts
If you have many small debts, like a ₹2,000 loan here and a credit card bill there, it can be hard to manage and often very expensive. A personal loan app can help you consolidate these multiple dues into a single, affordable monthly payment, making repayment simpler and more cost-effective.
- Pay One Bill, Not Many: A smart way to solve this is to take a single, new loan to pay off all your other smaller debts. This is called debt consolidation. You will now have just one loan to manage, and your life will be much simpler.
- Save on Interest: Credit cards often have a very high interest rate. A ₹50,000 personal loan will almost always have a much lower interest rate. So, you can save a lot of money by taking one loan to pay off all your high-interest debts.
4. Be a Smart Borrower from the Start
The best way to stop stressing about repaying a loan is by coming up with a thorough plan from the very beginning.
- Choose a Smart EMI: Use an online EMI calculator before you take out a loan. Pick an EMI that you can easily pay back, even if you have a bad month.
- Check for Prepayment Penalties: Certain lenders charge a penalty if you pay off the loan early. Before you take a loan, ask the lender if they charge this fee. A good company, such as Stashfin, makes all fees very transparent so that you know what you’re getting into.
- Create a Budget: The biggest thing you can do to handle your money well is create a budget. Keep track of the money you make and spend, then figure out how to save it. You can then apply this extra money to make additional payments on your loan.
Conclusion
Quickly paying off a ₹50,000 personal loan is not a secret. It’s about being clever and disciplined. If you do top-up payments above and beyond your EMI or repay a higher EMI whenever possible and employ some smart debt minimization tactics, you can be free of debt much earlier. Paying off your loan will not only save you a fortune in interest, but it’ll also free up some mental energy and help you keep the focus on your broader financial goals.
FAQs
Q1. Does paying my loan off early hurt my credit score?
No, it does not. In fact, it can help your credit score. It shows that you are a very responsible borrower who can manage debt well.
Q2. What is the difference between a partial prepayment and a full prepayment?
A part-prepayment is when you pay a small part of your loan extra. A full prepayment (also called foreclosure) is when you pay off the entire loan at once to close it.
Q3. Should I use my emergency fund to pay off my loan faster?
No, you should not. Your emergency fund is for a real emergency, like a sudden job loss or a medical bill. You should always keep your emergency fund safe and separate.
Q4. Can I get a loan from a different company to pay off my old loan?
Yes, this is called a “balance transfer.” Many companies offer this. It is a good idea if you can get a new loan with a lower interest rate.
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