6 Tips for Paying Less on Personal Loan
Personal loan has many benefits, but some institutions follow money minting practices that affect the financials of the borrowers, charging a lot of interest and forcing them to pay for a long time. And this makes the loan at the end of the accounts really expensive. The best thing we can do is learn to save a little and understand that there are always alternatives to lead a healthier financial life.
If you have found yourself, or are currently living in a similar situation, then this article will be helpful as it provides information on ways to pay less for a personal loan, so that you do not suffer in the process of paying off your loans.
But before you continue reading, you may like to know what is personal or private loan
So here are some tips to pay less for personal loan:
1) Pre-Payment or Advance Payment
For this, you have to first find an institution that does not penalize the advance payment.
All loans have a repayment term, and every month the interest agreed in the contract is paid off by the borrower. Then, if the borrower decides to ask for a loan amortized to 12 months, but has the possibility of advancing it, so that it is reduced to 10 months, he will be saving the interest that would have generated the last two months, making his loan even cheaper.
This options depends on the liquidity of the borrower, but it is undoubtedly a valuable practice that offers much cheaper personal loans.
2) Debt Consolidation
Many people are already indebted to institutions that charge a lot of interest and at a very high price. In such a case, the best thing is the consolidation of debts, also called as loan pooling. Even if there is penalty for prepayment, it does not matter because it actually results in less expense for the borrower. It is about grouping the most expensive credit into one cheaper credit.
Check out: Debt settlement risks
The simplest way to consolidate debts is with a personal loan, and what you should do is, first, add up all that is owed and get a total number; this number will be the one that must be paid in full through the loan, but the most important thing in this method is to get the personal loan for the sum of your debts and allocate it exclusively to it, and nothing else.
3) Compare and Decide
Internet is an ocean of information and there are sites that let you compare credit cards and personal loans. All you have to do is enter the site, choose the capital to borrow (how much money you need) and the term in which you would like to pay it, and click on the button “look for credit”. And automatically the system will list the loans from the cheapest to the most expensive. Select the best option and thus ensure that you pay less for a personal loan.
4) Choose the term that suits you best
This simple option could save you in a big way. The less time it takes to pay off the debt, the lower the interest rates i.e. less you have to pay. For this reason, it will always be convenient to choose the highest monthly payment to pay off the repayment in the shortest possible time.
5) Secured or Collateral Loan
Pledging your assets and getting loan against it, is the most cheapest way to get personal loan, as the interest charged by the lender is very less than the traditional way because of the low risks to the lender. The asset remains in the hands of the lender or creditor, for a certain period of time, as a guarantee of payment. At the end of the term, you get it back in return of payment i.e. the sum borrowed plus interest and commissions to the creditor. This type of loan is offered in many countries with an option to repay before the actual tenure, with no extra charges.
6) Get a grace period
A grace period is a plan in which customers only pay interest for a certain period of time; it can last a few months, or even several years. It’s all a matter of negotiating with the financial institution.
We hope that this information has been useful for you to face the financial problems that could arise as a result of the payment of a loan. Don’t limit yourself, there are alternatives. All you have to do is make the most of all your options.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).