5 ways to prepay your loan faster
1/5
Clear costliest loans first
Always tackle loans with the highest interest rate first such as credit cards or personal loans. Clearing these early cuts down your total interest outgo and improves your credit score.
2/5
Use bonuses & windfalls for prepayment
Use annual bonuses, incentives, or tax refunds to make extra payments towards your loan principal. Even one or two lump sum payments can reduce years from your loan tenure.
3/5
Choose tenure reduction, not EMI cut
When you prepay, banks often offer to reduce your EMI instead of your loan term. Always opt to reduce the tenure, this saves you more interest in the long run.
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4/5
Check for prepayment charges
Some loans like fixed-rate home loans may carry prepayment penalties. Floating-rate home loans usually don’t. Always check your lender’s policy before making extra payments.
5/5
Consider a balance transfer if rates drop
If market rates fall and your lender’s rates stay high, explore a balance transfer to another bank with a lower rate. Combine this with prepayment to reduce both EMIs and tenure.