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LoansJagat Team

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3 Min

26 Jun 2025

How to Create a Repayment Strategy That Works – Smart Debt Plan

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Manisha is a 33-year-old software engineer. She had an unpaid personal loan of ₹3.5 lakh, a credit card bill of ₹55,000, and an education loan of ₹1.2 lakh. She earns ₹92,000 per month.

 

She did some planning and cleared all her credit card dues within three months. Also, she closed her loan in 20 months, without ever defaulting. You must be wondering how she managed to do all this.

 

She followed a step-by-step repayment approach that was easy to maintain. If you are also in a similar position to Manisha, this blog will help you create your repayment strategy.

 

1. List Out All Your Loans In One Place

 

Before planning anything, you must get a clear idea of your total loan burden. You can look out for the following:

  • Amount remaining
  • EMI or minimum payment
  • Rate of interest
  • Time left to complete repayment
  • Type of loan

 

Let’s look at an example of outstanding loans:

Loan Type

Amount Left

Interest Rate

EMI or Minimum Due

Months Left

Credit Card

₹55,000

36% p.a.

₹8,000

NA

Personal Loan

₹3,50,000

13.5% p.a.

₹17,000

23 months

Education Loan

₹1,20,000

11% p.a.

₹5,500

18 months

 

2. Decide Which Loan To Tackle First

 

You can approach your debt in two ways:

  • High-interest first
  • Low-balance first

 

In Manisha’s case, she cleared her credit card bill (36% interest) first, even though it wasn’t the largest.

Strategy

Priority

Best When

High-Interest

More interest

You want to save money

Low-Balance

Smallest loan

You need quick mental relief

 

3. Plan Your Monthly Budget With Repayments In Mind

 

It won’t be possible for you to repay your debt if your budget is out of balance. You must allocate your salary across three main areas:

  • Extra repayments or savings
  • Loan EMIs
  • Monthly fixed expenses

 

Let’s look at an example of budget distribution for a salary of ₹92,000:
 

Expense Type

Amount (Monthly)

Rent and Utilities

₹21,000

Food and Travel

₹12,000

Loan EMIs

₹30,500

Extra Repayment

₹7,500

Savings

₹11,000

Miscellaneous

₹10,000

 

4. Use One-Time Income To Make Faster Repayments

 

During the year, if you receive any bonus, incentive, or gift amount, you can use it to prepay your loans.

Mahima received a performance bonus of ₹45,000. She used ₹35,000 to prepay her personal loan, reducing her principal. Let’s look at its impact on her loan:

Particulars

Without Prepayment

After Prepayment

Loan Balance

₹3,50,000

₹3,15,000

Interest Saved

₹0

₹6,050

EMIs Reduced

0

3

 

5. Think About Combining Multiple Loans

 

Combining your loans is a good option for you if you are handling more than one loan at a time. It can help you make your monthly payments easier.

 

Surya is paying more than 18% on one loan and 13% on another. Let’s look at after combining into one loan:

Criteria

Before Combining

After Combining

Number of Loans

3

1

Total EMI

₹45,000

₹30,000

Average Interest Rate

16%

12%

Monthly Savings

-

₹15,000

 

6. Avoid Missed Payments

 

You are aware of the fact that penalties and late fees are costly. You should set automatic deductions so you never miss your due dates. If you miss even a single EMI it can reduce your credit score and invite charges.

 

7. Don’t Hesitate To Talk To Your Bank

 

If you are facing any problems such as:

 

  • Cash crunch
  • Illness
  • Job loss

 

Then you must inform your bank before missing a payment. Your lender will offer:

 

  • EMI pause or moratorium
  • Loan restructuring
  • Tenure extension

 

It will help you avoid penalties. Also, you will be able to manage your credit history.

 

8. Avoid Fresh Loans

 

If there is not any emergency, then you must avoid taking any new debt while repaying old ones. You must try to keep your total monthly EMIs within 50% of your salary for better stability.

 

Final Thoughts

 

Do you think that the key to an effective loan repayment is speed? Then you are wrong. It is being consistent. If you want to become debt-free earlier then you should pay extra when it is possible, choose the right loan to close first, and keep your spending in check.

 

Even if you have a small amount to repay then do it. It will help you reduce your interest over time and give you more financial control. By following a repayment strategy effectively and with focus you will have peace of mind and have more confidence to handle your money.

 

FAQs

 

1. Is it possible to negotiate interest rates with banks?

Yes, especially if you have a strong repayment record.

 

2. Will early repayment affect my credit score?

Early repayment improves your score over time.

 

3. Is using a bonus for repayment a good idea?

Yes, it reduces your loan balance and total interest paid.

 

4. Can I skip an EMI if I don’t have funds?

You should speak to your bank immediately to explore options.

 

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About the Author

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?

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