Most of us get a personal loan to meet the current financial crisis but later fail to pay off the loan debts on time. To avoid getting into this situation, it is wise to read the fine print carefully and look for low interest rate loan schemes before signing the dotted line. Although it is good to pay all the loan debts on time, but when it comes to personal loans, the sooner you pay, the better will be your financial health and the credit score. If you are one looking to pay off your debts in the shortest possible time period, in the subsequent sections we will discuss some tips that you can follow:
- Choose the best home loan deal: Someone rightly said that the process of clearing loan debt faster starts at the time you get a loan. Make sure you choose the personal loan wisely by comparing the options available to you. Remember that the rate of interest on personal loan schemes varies at least 2-6% between lenders. Therefore it is good if you compare interest rates online before finalizing any one personal loan scheme.
- Check for no payment penalty: Most banks charge a penalty if you pay higher EMI’s to pay your loan faster this penalty is irrespective of the personal loan interest rate on offer. They do this to make up for the revenue loss that will incur on interest income. Thus to avoid getting into this issue, it is wise to choose a bank that offers zero pre-payment penalties on personal loan EMI’s.
- Choose the shortest loan tenure: By using easy and flexible EMI calculator, you can determine the loan options with shortest loan tenure. EMI is all about the interest rate, loan amount and tenure. Once you have opted for the personal loan with low-interest rates, you can choose the shortest EMI tenure based on your paying capabilities.
- Streamline budget and keep a check on unnecessary expenses: Making a budget and streamlining expenses is the best way to pay off the loan debts earlier. It also allows you to spend wisely and allocate your funds as per your basic requirements. Also, it allows you to keep a track on where your income is spent and you can easily cut down on charges that seem inappropriate to you to pay the loan debts faster.
- Create an emergency fund: Always create emergency funds to make sure that you can pay the loan EMI’s even in adverse situations that demand unexpected money disbursals. Missing EMI’s will add to your loan interest. It will also impact your credit score and make your future loans more expensive to you.
- Repay high-interest loans first: Making a list of all outstanding loan and them paying the one with high-interest rate can benefit you at large. Once you have cleared the most costly debt, you can move forward to pay the less expensive one.
- Monetize Assets: You can even choose to pay your home loan by monetizing your assets whether it a house, car, your life insurance policies, bonds, shares, etc. You can use these as collateral to secure a low interest secured loan from a lender of your choice.
These are quite a few significant tips that you must consider to pay your personal loan debts on time. Also, you can try and get your outstanding personal loan converted to a secured loan using your vehicle or residential property as security. But remember, this can only be done if your house or vehicle is free from various sort of debts. However note that if you fail to pay this loan, you may end up losing your collaterals. So it is a must to determine your condition and your debt paying capability before keeping your valuable property/vehicle on stake.