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Smart Ways to Repay a Personal Loan Faster
Strategies to clear your personal loan ahead of schedule, save on interest, and improve your financial health.

Why Repay Personal Loans Quickly?

Personal loans often come with higher interest rates compared to secured loans like home or car loans. Paying them off faster can:

  • Save a significant amount on total interest paid.
  • Free up your monthly cash flow sooner.
  • Reduce your debt-to-income ratio, improving your creditworthiness.
  • Provide peace of mind by eliminating a financial obligation.

Strategies for Faster Repayment

1. Make More Than the Minimum Payment

Even a small extra amount paid towards your principal each month can reduce the loan tenure and total interest. Consider rounding up your EMI or adding a fixed extra sum.

2. Use the Debt Snowball or Debt Avalanche Method

If you have multiple debts, the Snowball method involves paying off the smallest debt first for psychological wins, then rolling that payment into the next smallest. The Avalanche method prioritizes paying off the debt with the highest interest rate first, saving more on interest.

3. Make Bi-Weekly Payments (if allowed)

Instead of one monthly EMI, split it into two payments made every two weeks. This results in 26 half-payments, equivalent to 13 full monthly EMIs in a year, accelerating repayment. Check if your lender permits this without penalties.

4. Prepayment / Part-Payment

Use windfalls like bonuses, tax refunds, or other unexpected income to make lump sum part-payments towards your loan principal. This drastically reduces the outstanding balance and future interest. Check for any prepayment charges with your lender.

5. Balance Transfer (Use with Caution)

Transfer your outstanding loan balance to another lender offering a lower interest rate.
Pros: Can reduce interest outgo. May offer a better repayment tenure.
Cons: Involves processing fees, and eligibility criteria. Ensure the new rate is significantly lower to make it worthwhile. Be wary of introductory low rates that may increase later.

6. Cut Expenses & Increase Income

Review your budget to identify non-essential expenses you can cut. Look for opportunities to increase your income (e.g., freelancing, side hustle) and allocate the extra funds towards loan repayment.