8 Benefits of Pre & Partial Payment of Personal Loan

What if we told you that one simple action could help you reduce your debt and help you save money as well, all while accelerating your journey to financial freedom? While you might be already aware of the concept of prepayment of personal loans,do you truly understand how useful they can be to you? Let's find out!

Table of Content

• Reduces the Overall Loan Burden
• Shortens the Loan Tenure
• Saves on Interest Costs
• Improves Your Credit Score
• Offers Financial Flexibility
• Enhances Loan Prepayment Terms
• Reduces Financial Stress
• Boosts Your Future Borrowing Power

Personal loans offer a quick solution to financial emergencies, but the burden of monthly EMI and the accompanying interest rates can take a toll on your financial planning most of the time. What if you could reduce that burden? 

Most banks and NBFCs like Muthoot Finance, offer you the option to prepay or partial payment on your personal loan online, which speeds up your path to financial freedom and unlocks a series of benefits that can help you manage your finances more effectively. Ahead are the top eight benefits of pre and partial payment on personal loans to help you guide you better.

Reduces the Overall Loan Burden

When you make the prepayment of a personal loan, you directly reduce the principal amount. The lower the principal amount, the less you end up paying in interest over the tenure of the loan. By paying a little extra every month, or making a larger lump sum prepayment on your personal loan, you decrease the outstanding loan balance, which can ultimately lower your monthly payment and save you a significant amount in interest. For better clarity, use a personal loan EMI calculator that will help you see how even small changes in your payment schedule can lower your monthly repayments in the long term.

Shortens the Loan Tenure

When you make partial payments or prepay your loan amount, you can opt to reduce the tenure instead of just lowering your EMI. This means you can pay off the loan quicker than initially planned with the lender, freeing up funds for other financial commitments, like saving for a home or investing for the future. By shortening the loan tenure, you pay off your debt faster and save on the interest rate at the same time, since you are borrowing the money for a shorter period.

Saves on Interest Costs

You might already be aware that interest in personal loans accumulates over time, and the longer you take to repay the loan, the more you end up paying in interest. However, by making a prepayment of your personal loan, you can minimize the interest outgo. Even a small partial payment on your personal loan can help you reduce the principal amount, which directly affects the interest you need to pay. If you are trying to save money, this strategy helps reduce the total cost of borrowing without compromising on the loan amount or term.

Improves Your Credit Score

One of the most impactful ways to improve your creditworthiness is by managing your debt efficiently. By making a timely prepayment and showing that you can handle your financial responsibilities, you boost your credit score ultimately. Lenders often consider your history of making payments ahead of schedule when evaluating your eligibility for future loans. 

Offers Financial Flexibility

Opting for a personal loan with a prepayment option provides you greater flexibility in managing your finances. By reducing the outstanding balance, you free up more of your monthly income, which can be utilised for other significant savings, purposes or emergency funds. The flexibility of a personal loan with prepayment option makes it easier for you to take control of your finances.

Enhances Loan Prepayment Terms

If your lender offers you a personal loan with prepayment as an option, you can enjoy the flexibility of making payments without facing penalties. Most lenders charge a small fee for prepayment, but some lenders like Muthoot Finance offer an attractive prepayment clause that allows you to pay off part of the loan without additional charges after a certain period.

Reduces Financial Stress

The peace of mind that comes with reducing your debt faster is incomparable. Regular part payments on personal loans can make you feel more in control of your finances. As your debt decreases over time, so does the stress associated with having a long-term financial commitment. Knowing that you are paying down the principal amount faster, helps you feel confident in your financial management and reduces the mental load that comes with paying off a loan over the tenure.

Boosts Your Future Borrowing Power

Lenders are more likely to offer attractive interest rates to borrowers who have a b credit history. By making prepayment of personal loans online, you show lenders that you are financially responsible and capable of handling debt. This improves your ability to secure loans at competitive rates, giving you better options for financing large purchases or investments in the future.

If you are considering applying for a personal loan online or looking for a personal loan with a prepayment option, Muthoot Finance is a great option. With competitive interest rates, flexible repayment options and trust, Muthoot Finance offers loans that allow you to make the most of pre or part payments on personal loans. Take the first step today and use a personal loan EMI calculator to see how quickly you can pay off your loan and save money in the long run.