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5 Ways to Minimize the Cost of your Personal Loans

You can apply for a personal loan from banks and non-banking financial institutions on easy terms if you have a good CIBIL score. It’s based on a host of factors like your credit utilization quotient, loan repayment record, and present debt condition. Then, if you have managed to borrow a sum of money, but struggling to pay off your loan, fret not. There are many ways to reduce your loan cost. Here are five tips to cut back on the cost:

1. Opt for Another Low-Interest Loan

Even if you do not have adequate funds to pay off your current loan completely, switch to another low-interest rate on personal loan or shorter loan term. If you get both, there is nothing like it. You can choose an offer that comes with reduced interest rates on the other loan together with a shorter deal. Use a loan calculator to determine what amount you can save by choosing a loan with low-interest EMIs. You can always work on the second loan later after you clear your existing debt.

2. Pay off your Loans with Savings

Clear your current debts with your savings, if you have a substantial amount in your bank account. Ensure that the prepayment fees are not skyrocketing. When you have savings, make sure that you pay off your expensive or bigger loans first. It is one of the best ways to reduce the overall cost of your existing debt.

It’s also a wise idea to utilize windfalls received as bonuses, a maturity of insurance policies or sale of a property to pay off existing loans completely or even partially (pre-payment). Pre-payment reduces the principal amount, thereby lowering EMIs and tightening interest outflow.

3. Pay your Existing Loan with a Credit Card

When you repay your dues on time and have a sound CIBIL score, you can opt for low-interest or interest-free balance transfer credit cards. Though such deals come occasionally, they let you transfer funds into your savings account.

You can use these credit cards to pay off loans and overdrafts. However, these deals come with some charge or fee. Therefore, ensure whether it is easy on your wallet before applying for it. If you do so, make sure to pay off the outstanding credit card dues on time to avoid penalties.

4. Choose Debt Consolidation Carefully

You can apply for debt consolidation loans to combine your multiple debts. Today, obtaining these loans isn’t as easy, and borrowers can opt for it only when they fail to get favorable interest rates on a personal loan.

However, chances of disapproval are rare when it comes to a personal loan. Debt consolidation loans are a tough nut to crack because they’re secured against your property such as your home or car. Though consolidation may seem like a lucrative option with lower repayments and rates of interest, you can lose your asset if you fail to repay. Therefore, think of the risks before applying. The move can also land you in debt trap in the long-run.

5. Pay Off with Additional Payments

Even if borrowers meet the personal loan eligibility criteria, they may fail to make monthly payments on time due to financial constraints. So, if you cannot repay a personal loan fully, use any additional payment that you get in the form of bonuses, a realization of stocks, etc., to clear the outstanding balance fast and reduce the cost of your loan.

However, ask your lender if you can make extra payments. Unless it’s allowed in the fine print, you cannot overpay without giving the lender a notice. Review your existing financial obligations before doing so to ensure you don’t miss out on the essential commitments such as paying for your child’s education, insurance premium, etc.

Even if you know how to apply for a personal loan and get duly approved, always compare personal loan approval criteria and interest rates online. Bajaj Finserv makes your job easy with pre-approved offers. Furnish a few basic details to avail your exclusive offer.

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