A personal loan can be a lifesaver during financial emergencies, home renovations, or big-ticket purchases. However, the real challenge begins after disbursal, ensuring you repay the loan efficiently while minimising interest outgo. Since personal loans are unsecured and often come with higher interest rates than secured credit, being strategic about repayment can save you thousands, if not lakhs, over time.
Whether you’ve borrowed from a traditional lender or a modern fintech like Bajaj Finserv, understanding how to manage repayments smartly can significantly impact your long-term financial health.
How Does Paying More Than the Minimum EMI Help You Save?
One of the simplest yet most effective ways to reduce your total loan cost is by paying more than your scheduled EMI (Equated Monthly Instalment) whenever possible. Even a small additional amount each month directly reduces your outstanding principal, thereby lowering the total interest you pay.
For instance, if you have a ₹5 lakh personal loan at 12% interest for 5 years, adding just ₹1,000 extra per month could save you over ₹30,000 in interest and shorten your loan tenure by several months.
Most lenders, including Bajaj Finserv, allow partial prepayments without significant penalties after a few EMIs are paid. Always confirm your lender’s prepayment terms before making additional payments to ensure you receive the maximum benefit.
Why Should You Opt for Shorter Tenure Loans If You Can Afford Them?
A common mistake borrowers make is selecting a longer repayment tenure to reduce their monthly EMIs. While this makes repayments more manageable in the short term, it significantly increases the total interest paid over time.
For example, a ₹3 lakh loan at 11% interest for 5 years will cost around ₹91,000 in total interest, whereas the same loan repaid in 3 years will incur about ₹54,000, a saving of nearly ₹37,000.
So, if your monthly budget allows, choose a shorter tenure. The EMIs will be higher, but you’ll be debt-free faster and pay much less interest overall. Personal loan providers like Bajaj Finserv let you customise tenures between 12 to 60 months, giving you flexibility to choose the most cost-efficient option.
How Can Loan Balance Transfer Reduce Your Interest Burden?
If you’ve been repaying your personal loan for a while and notice that new lenders are offering lower interest rates, it might be worth considering a loan balance transfer. This process allows you to move your existing loan from one lender to another for better terms.
For example, if your current loan is at 14% and another bank offers 10.5%, switching could reduce both your EMIs and total interest payments. However, before transferring, calculate the costs involved, such as processing fees and prepayment charges, to ensure the move genuinely saves you money.
Lenders like Bajaj Finserv often provide attractive transfer options with minimal documentation and instant online approval, making the switch seamless for borrowers looking to optimise repayments.
Should You Make Use of Windfalls and Bonuses to Prepay?
Any unexpected income, like an annual bonus, tax refund, or investment maturity, can be a golden opportunity to make partial or full prepayments on your loan. Reducing the outstanding balance early significantly cuts down future interest accumulation.
Let’s assume you took a ₹6 lakh personal loan at 12% for 5 years. By making a one-time prepayment of ₹1 lakh after the first year, you can save nearly ₹35,000 in interest and shorten your loan term by several months.
Most reputed lenders encourage such proactive repayment behaviour. For example, Bajaj Finserv offers flexible part-prepayment facilities that can be initiated easily through its app or online portal.
How Can Automating EMIs Help Maintain Discipline?
Setting up auto-debit for EMIs ensures timely payments without the risk of missing due dates. Missed or delayed EMIs not only attract late fees but can also negatively affect your credit score, leading to higher interest rates on future loans.
An automated repayment schedule also provides psychological comfort; you don’t have to remember dates or worry about manual transfers. Over time, this consistency helps build a strong repayment record, improving your creditworthiness.
Additionally, always maintain a small buffer in your bank account before the EMI date to avoid auto-debit failures due to insufficient funds.
Why Is Refinancing a Good Option for Financial Flexibility?
Sometimes your financial situation changes, perhaps your income has increased or you’re juggling multiple debts. In such cases, refinancing your personal loan can be an effective strategy to regain control over your finances.
By renegotiating your loan terms, you can either secure a lower interest rate or adjust your EMI schedule to match your current financial capacity. Some lenders even allow you to convert a fixed-rate loan into a floating-rate one, which may offer savings when interest rates trend downward.
Bajaj Finserv, for example, offers refinancing options that let borrowers consolidate debts, simplify repayments, and secure better terms digitally through its app.
How Can Comparing Loan Offers Save You from Paying Extra?
Before applying for a new personal loan or refinancing an existing one, thoroughly compare lenders’ offers. Even a 0.5% difference in interest rates can translate into significant savings.
Use online loan comparison platforms or visit lenders’ official websites to evaluate:
- Interest rate structure
- Processing fees and hidden charges
- Prepayment flexibility
- Repayment tenure options
Reputed lenders like Bajaj Finserv, HDFC Bank, and Axis Bank often display transparent loan terms and provide pre-approved offers for eligible customers, ensuring clarity before you commit.
What Role Does a Good Credit Score Play in Reducing Interest?
Your credit score is a major factor influencing your personal loan interest rate. Borrowers with scores above 750 typically enjoy preferential rates, while those with lower scores might face higher EMIs.
Maintaining a strong credit profile through timely EMI payments, low credit utilisation, and minimal outstanding debt is crucial for better loan terms. Periodically checking your credit report can also help detect discrepancies and correct them before applying for a new loan.
With digital lenders like Bajaj Finserv, you can track your credit score directly within the app, helping you plan better and negotiate for favourable rates.
Conclusion
Paying off a personal loan smartly isn’t just about clearing debt; it’s about minimising the cost of borrowing and improving your financial discipline. By making extra payments, opting for shorter tenures, leveraging balance transfers, and using digital tools wisely, you can save a significant amount on interest while staying financially secure.
Apps and digital platforms from trusted lenders like Bajaj Finserv have made it easier than ever to manage loans efficiently. Whether you’re planning prepayments or refinancing options, staying informed and proactive ensures you not only repay your loan comfortably but also build a strong foundation for future credit opportunities.
Refresh Date: October 30, 2025
