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‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
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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.
Before planning anything, you must get a clear idea of your total loan burden. You can look out for the following:
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 |
Read More - Loan Repayment Timing Impacts Your Future
You can approach your debt in two ways:
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 |
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:
Expense Type | Amount (Monthly) |
Rent and Utilities | ₹21,000 |
Food and Travel | ₹12,000 |
Loan EMIs |
₹7,500
Savings
₹11,000
Miscellaneous
₹10,000
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:
You need quick mental relief |
₹30,500
Extra Repayment |
*T&C Apply
Particulars | Without Prepayment | After Prepayment |
Loan Balance | ₹3,50,000 | ₹3,15,000 |
Interest Saved | ₹0 | ₹6,050 |
EMIs Reduced | 0 | 3 |
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:
Also Read - Late Payments on Your Credit Score
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 |
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.
If you are facing any problems such as:
Then you must inform your bank before missing a payment. Your lender will offer:
It will help you avoid penalties. Also, you will be able to manage your credit history.
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.
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.
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.
