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Missing an EMI not only leads to penalty charges but can also affect your CIBIL score and delay loan closure.
Prepaying a portion of your loan early cuts down the overall interest cost.(Representative Image)
When it comes to borrowing money, personal loans often seem like a quick and convenient solution. However, the interest burden can grow significantly over time. Since interest continues to accrue throughout the loan tenure, a longer repayment period often means paying far more than the original amount borrowed.
That’s why many borrowers aim to close their personal loans early. With careful planning and disciplined repayments, you can shorten your loan tenure, reduce overall interest costs, and move closer to becoming debt-free sooner.
Use Extra Income to Reduce the Principal
If you receive any additional income, such as a bonus, tax refund, cashback, or unexpected savings, consider using it to repay a part of your loan. Directly reducing the principal amount lowers the overall interest burden. Even small lump-sum payments made occasionally can make a noticeable difference in cutting down your loan tenure.
When you reduce the principal amount, the interest calculated on your loan also decreases. Over time, this can significantly shorten your repayment period and help you close the loan months or even years earlier.
Increase Your EMI Payments
If you’ve received a raise or your earnings have improved, think about increasing your EMI amount. Paying a little extra every month can speed up repayment and help you close the loan sooner.
Don’t Skip or Delay EMIs
Missing an EMI not only leads to penalty charges but can also affect our CIBIL score and delay your loan closure. To stay on track, set up an auto-debit from your bank account or schedule reminders so your payments are always made on time.
Opt for Prepayment if Possible
Many banks and financial institutions allow borrowers to prepay their loans before the tenure ends. A partial prepayment of even Rs 25,000 or Rs 50,000 can make a meaningful difference. Since interest is calculated on the remaining principal, reducing it early helps lower the total interest you pay over the loan’s tenure.
However, some lenders may charge a prepayment penalty, so it’s important to review the terms and conditions before making a lump-sum payment.
Prioritise High-Interest Loans First
If you have multiple loans, prioritise repaying those with the highest interest rates, such as credit card dues or personal loans, as this helps reduce your overall interest burden faster.
Avoid Loan Stacking
Taking another personal loan to close an existing one only makes sense if it’s structured as a proper balance transfer at a significantly lower interest rate. Otherwise, you’re just moving the debt around and possibly paying more.
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February 13, 2026, 13:39 IST
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