4 Proven Strategies to Pay Your Loans Faster

4 Proven Strategies to Pay Your Loans Faster

Generally, we all take various loans and would keep paying EMIs every month. Due to covid pandemic, there are several businesses that got shut down for several months. Lockdowns have created more stress as there is less cash flow in the business. It is becoming difficult for people to pay off the loans availed by them. If they can implement a few strategies they can clear off their loans at a faster pace. In this article, we would provide 5 Proven Strategies and Tips to pay your loans faster.

You may like: How to claim 1.5 Lacs home loan interest under affordable housing scheme?

What are various loans offered by banks or financial institutions?

Here are various loans offered by them.

1) Home Loans

2) Personal Loans

3) Loans on Credit Cards

4) Consumer Loans to purchase various items like laptops, mobiles, A/C, refrigerators etc.,

5) Car Loan

6) Other Loans

5 Proven Strategies to Pay Your Loans Faster

#1 – Strategy – Filter High interest rate loans and prioritize payment

You might have taken loans on credit cards, home loans, consumer loans, car loan etc., However, you might be paying high interest rates on few loans and low interest rates on others. You can filter in the descending order of the interest rates and focus on the high interest rate loans.

E.g. Loans on credit cards can cost you say 18% and home loans might cost you say 8%.  Then your priority is to clear credit card loans at the earliest. Generally, loans on credit cards and personal loans comes with high interest rates. Review your loans based on higher interest rates and target to close in a staggered manner.

Once you start clearing your loans with higher interest, you would have more money in hand.

#2 – Strategy – Pay out the loans which is easier for you

This is exactly opposite of Strategy #1, but yet powerful strategy to close your loans faster. Whatever is easier for you, proceed and payoff that loan.

E.g. If you have a personal loan of Rs 2 Lakhs and a credit card loan of Rs 60,000. If you are able to save 60,000, clear-off the credit card loan which is easier for you instead of waiting and accumulating money to clear personal loan which might take longer time.

Let me give another example. Assume you have taken consumer loans to purchase a laptop of Rs 50,000 and have a credit card loan of Rs 1 Lakh. It might be easier for you to accumulate 50,000. In that case, clear the consumer loan, instead of waiting to accumulate funds to clear credit card loan.

Once you clear one loan, your confidence level would be higher and you would focus to clear all other loans at a faster pace.

#3 – Strategy – Take Top-up on low interest rate loan and clear other loans

I have advised this to many of my friends and this strategy works like a magic. You might have high interest rate loans (e.g. personal loans, consumer loans or credit card loans or car loan) and other low interest rate loans (e.g. home loan). You can take top-up loans on your low interest rate loans and payoff high interest rate loans.

E.g. If you have home loans @ 8% and personal loans say at 18%. You can take a top-up home loan and payoff personal loans.

You would save interest and you would have higher money in hand and it can help you to pay home loans faster. I have discussed earlier about various ways to close home loan faster. You can follow those tips too.

#4 – Strategy – Transfer home loan to another lender or ask the lender for interest rate reduction

Banks or financial institutions would increase the interest rates on home loans without your knowledge. Generally they offer various home loan schemes. Some might be fixed interest rates and some are linked to RBI Repo rate etc. Hence you should check the interest rate charged to you now by banks on your home loan compared to what they are offering to new customers. Go and ask for interest rate reduction. They might charge nominal fees and would do it. If not, look to transfer home loan to another lender who can provide at lower interest rates. This strategy can help you to save lakhs of rupees.

Let me provide my example itself. I have taken home loan from LIC Housing Finance in 2014 @ 8.5% interest rate. This is fixed for 2 years and later on, linked to their lending rate. After 3 years, I have observed that they have increased the interest rate to 12.5%. While I am paying same EMI every month, the tenure is increased for an additional 4 years (approx.). There was no such communication to me either through email or SMS. I have noticed this when I casually logged into their website. You cannot believe that there is small  process where I had requested them to reduce to 7.5% by paying nominal fees of Rs 10,000 as processing charges. This process completed within 4 weeks time. Instead of paying for 4 additional years, now I am paying for 2 years less tenure from original tenure (total 6 year reduction).

Which Strategy works well for you?

There is no simple answer here. This would depend on your loans and your current situation. You should assess your current financial status, filter your loans based on interest rates, easier to close etc., and try to clear your loans faster.

Do you have any such experiences of closing loans faster, then please share in the below comments.

Have you liked our tips and analysis? Then share it on your Facebook, Twitter, Telegram and other social media, which might be useful to your friends too.

Suresh KP


  1. Most of the HFCs (I mean pure HFCs and not PSU banks giving housing loans) have these kinds of clause where they would keep increasing your lending rate whereas they would offer substantially lower rate to their new customers, despite having flexible interest rate (now this is compulsory as per RBI/NHB directive). And for doing that, they would charges processing fee also separately. It makes sense to keep on checking with them periodically to reduce the interest burden.
    Secondly, one should never increase the tenure of the loan and rather, increase the EMI (if it is possible). By this way, your total interest outgo on the loan is reduced.

    1. Hi Kamalji, Point no.1. That is what I did and got 6 years lower tenure for my home loan 2) Increasing the tenure is possible, but I am not sure whether HFC/Bank would agree to increase EMI. I have never seen such case.

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