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“Taking loan is easy… but repaying it is not.”
Many people in our country have realised this the hard way.
But what if I told you — you can pay off your personal loan faster, save money on interest, and still live comfortably? Yes, it’s really possible.
In this post, I will share 5 simple and smart tips that can help you clear your personal loan early. These ideas can work whether your income is ₹30,000 or ₹1 lakh. No big financial knowledge required.
Let’s get into it!
Why Paying Off Loan Early Is Always Better?
Before I share the tips, let’s understand why we should try to close loans early.
In India, many people keep paying EMIs for years without thinking of ending it early. But if we manage it smartly, we can save so much.
Some clear benefits of early loan repayment:
- You pay less interest in total
- Your credit score improves
- Your income becomes free for savings or investment
- You feel less stress every month
Now let’s move to the real tips
Tip 1: Do Part-Payments Whenever You Can
This is one of the best and easy methods.
What is part-payment?
It means you pay some extra money (apart from EMI) towards your loan. Even ₹10,000–₹20,000 can help.
Most banks and NBFCs allow part-payments after a few EMIs. Charges are low or even zero in some places.
Why it works:
- Your principal amount reduces
- That means less interest in future
- And you also reduce the loan tenure
Real example:
- Loan: ₹5 lakh
- EMI: ₹10,870
- Tenure: 5 years
- Interest: 13%
- Part-pay ₹50,000 after 1 year → Tenure becomes shorter by almost 10–12 months!
Use bonus money, FD returns, or gift money during festivals for this.
But always check with your lender once. Some NBFCs may charge 2% fee.
Tip 2: Increase EMI When Your Salary Grows
As we all know, many people increase expenses when salary goes up. But what if we increase EMI instead?
Why it helps:
- Higher EMI clears loan faster
- Less EMI months = Less total interest paid
Example:
If EMI is ₹10,000 and you increase it to ₹12,000… you can finish your 5-year loan in 4 years (or even less). And save good money.
Try increasing EMI by 5%–10% every year, just like your salary hike.
Many banks allow this change through their mobile app or netbanking.
Bonus Tip: If you have side income from freelancing or YouTube etc., you can use some of it to increase EMI too.
Tip 3: Try Fortnightly (Every 2 Weeks) Payments
This is not very popular in India but it works great.
What is this?
Instead of paying 12 EMIs in 1 year, you pay half EMI every 2 weeks. So total 26 payments = 13 full EMIs.
You are paying 1 extra EMI every year without much burden.
- This helps you reduce loan duration and interest.
In India:
Most banks don’t officially offer this. But you can do it manually:
- Pay an extra EMI once every 6 months
- Or set auto-payment of half EMI twice in a month
🧮 Example:
If monthly EMI is ₹10,000
→ Pay ₹5,000 every 2 weeks
→ In 1 year, you pay ₹1.3 lakh instead of ₹1.2 lakh
→ This extra ₹10,000 saves a lot of interest
Tip 4: Don’t Take New Loans Until You Finish This One
One of the biggest mistakes seen in Indian borrowers is taking too many loans together.
People take a personal loan, then a bike loan, then a mobile on EMI… and keep paying EMIs all month.
Why to avoid this:
- Your salary gets divided
- EMI-to-income ratio becomes too high
- Credit score can also go down
- You can’t do part-payment or EMI increase easily
✅ What you should do instead:
- Wait for the current loan to finish
- If you really need to buy something, use debit card or no-cost EMI
- Or better, save first, then buy
If you already have many loans, you can try loan consolidation. That means taking one big loan at lower interest and using it to pay off the other loans.
Tip 5: Select Short Tenure at Start (If You Can)
Many people, when applying for loan, choose the longest tenure because EMI becomes low.
But they don’t realise they are paying too much interest in the long run.
Example:
For ₹5 lakh loan at 13%:
| Tenure | EMI | Total Interest |
|---|---|---|
| 3 yrs | ₹16,837 | ₹1.06 lakh |
| 5 yrs | ₹11,377 | ₹1.82 lakh |
You pay ₹76,000 extra just for 2 more years.
Always choose the shortest tenure you can manage comfortably.
Even if EMI feels slightly high, you will save big money.
Use online EMI calculators before finalising your loan.
Bonus Tip: Use Any Extra Money to Close Loan
Got a surprise income?
Like:
- Tax refund
- Diwali bonus
- Selling old bike
- Stock profit or crypto gain
- Even marriage gifts
Instead of spending it on shopping or travel, use that to close your loan.
Most lenders in India allow full foreclosure after 6 or 12 months. Many don’t even charge any fee if you’re salaried.
Quick Recap: Smart Loan Repayment Tips
| Tip | Why It Works |
|---|---|
| Part-payments | Lowers principal + shortens loan |
| Increase EMI | Faster repayment, less interest |
| Bi-weekly EMIs | 1 extra EMI every year |
| Avoid new loans | Focus your income on one EMI |
| Shorter tenure | Saves you interest from Day 1 |
Common Myths (And the Real Truth)
| Myth | Reality |
|---|---|
| “Banks won’t allow early closure” | Most allow it after 6–12 months |
| “Prepaying lowers credit score” | No, it improves your score |
| “Better to invest than repay loan” | Only if investment return > loan interest |
| “Small part-payments don’t help” | Even small extra payments matter a lot |
Real Story: How Rahul Paid Off ₹5 Lakh in 3 Years
Rahul, 28, from Pune took ₹5 lakh loan for marriage. Tenure was 5 years.
But he did a few smart things:
- Used ₹50,000 bonus every year for part-payments
- Increased EMI by ₹2,000 in year 2
- Didn’t buy car till loan was finished
Result: Loan closed in 3 years. He saved ₹50,000+ interest and got a better CIBIL score.
Final Thoughts: Don’t Just Pay Fast, Pay Smart
Repaying your loan early doesn’t mean paying more money. It means paying smartly and using every chance to save interest.
A loan closed early is like a silent investment. It brings peace of mind.
So plan well, follow these tips, and become debt-free sooner than expected.
FAQs
Is it better to increase EMI or make lump sum payments?
Both help. Use whichever suits your cash flow better.
Does early loan closure improve credit score?
Yes, it shows strong repayment habits
Can I close loan in first year?
Yes, most lenders allow after 6 or 12 months.
Are there charges for early closure?
Some charge 2%–4%, but many waive it for salaried people.
Should I use savings to repay loan?
Yes, if loan interest is higher than savings return (which usually is).