When you borrow any type of loan, you’re agreeing to repay the lender within a specific tenure. Failing to do so, you’ll have to pay additional fees on over and above the outstanding balance. Based on the loan type, there are several loan repayment methods. It’s important to know about all the loan repayment methods in detail.
What is loan repayment?
Loan repayment is the act of settling an amount borrowed from a lender along with the applicable interest amount. Usually, the repayment method includes a scheduled process in the form of equated monthly instalments (EMIs). Such instalments usually include both the principal and interest components, which need to be paid within a fixed tenure.
What are the types of loan repayment?
1. EMIs
EMI stands for equated monthly instalments. It's a payment made by a borrower to a lender every month at a specified date. The EMI amount remains the same throughout the loan tenure.
Bajaj Finserv allows customers to repay the personal loan EMIs through part-prepayment andloan foreclosure facilities.
- Part-prepayment
Part-prepayment is a facility where you pay back a portion of your loan that is more than one EMI. This is a simple way to save on your interest payable. Your part-prepayment amount gets deducted from your principal outstanding as on the month of making the prepayment. You can choose apart-prepayment facility if you have extra cash, and you want to use it to pay off your loan ahead of time.
With a Bajaj Finserv Flexi Personal Loan, you can enjoy the benefit of making part-prepayment of the loan at no extra cost. Also, you can use the personal loan EMI calculatorto know the instalment to be paid for your loan amount.
- Foreclosure
The process of paying off the whole outstanding loan amount before the set due date is known as the foreclosure.A personal loan often has a specific lock-in period after which you can choose to foreclose the remaining debt and pay the entire loan amount. But we generally advise you to foreclose your loan amount when you have some surplus funds.
With Bajaj Finserv Flexi Personal Loan, you can enjoy the benefit of making part-prepayment of the loan at no extra cost. The process of paying off the whole outstanding loan amount before the set due date is known as the foreclosure.
2. Bullet payment
In this mode of repayment, the interest has to be paid every month by the borrower. At the end of the tenure, the entire principal amount shall be repaid via a bullet payment. Unfortunately, this loan method is available for only a few credit products.
How to repay loans quickly?
Make extra payments:Whenever possible, make additional payments towards the loan principal to reduce the outstanding balance faster.
Increase EMI amounts:Consider increasing your monthly instalments (EMIs) to pay off the loan sooner and save on interest costs.
Utilise windfalls:Use bonuses, tax refunds, or other unexpected income to make lump sum payments.
Cut unnecessary expenses:Reduce discretionary spending and redirect the savings towards loan repayment.
Consolidate debt:If you have multiple loans, consider consolidating them into a single loan with a lower interest rate for more manageable payments.
Before opting for a personal loan, know about the repayment type and opt for the one that benefits you the most.
