Tips for Paying Off Your Axis Bank Personal Loan Early and Saving Money on Interest
So, you took out a personal loan from Axis Bank, and now you’re wondering, “How do I get rid of this debt faster and pay less interest?” Smart move! Nobody likes paying extra money to the bank when they don’t have to.
Loan prepayment is like finding a cheat code (legally, of course) that helps you clear your debt sooner while saving on interest. But before you go all in, there are some things you need to know. Let’s break it down in the simplest way possible.
Understanding Loan Prepayment
Loan prepayment means paying off your loan before your tenure officially ends. This can be done in two ways—part-prepayment, where you pay a chunk of your loan early and continue paying EMIs on the remaining balance, or full prepayment (foreclosure), where you pay off the entire loan in one go and eliminate EMIs altogether.
Since interest is charged on the remaining balance, prepaying reduces what you owe, ultimately lowering the total interest paid. The earlier you prepay, the bigger the savings.
Why Prepay Your Loan?
Prepaying your loan has multiple benefits. The most obvious one is saving money on interest. The sooner you pay off your loan, the less interest you pay in total. Additionally, prepayment helps reduce financial stress by lowering your overall debt burden, improving your credit score, and increasing your chances of getting future loans approved more easily.
If you have extra funds lying around, using them to prepay a high-interest personal loan is often a smarter move than spending on non-essential things.
When is the Best Time to Prepay?
Prepaying your loan at the right time makes a significant difference. In personal loans, the interest is front-loaded, meaning you pay more interest in the initial years and less toward the end. That’s why prepaying in the first half of your tenure gives you the most savings. If you’re close to completing the loan, prepaying won’t make much of a difference since most of your payments are already going toward the principal amount.
How to Prepay Your Axis Bank Personal Loan
Before making any prepayment, check your loan agreement for prepayment terms. Axis Bank allows prepayment only after 12 months of loan tenure, and there may be a charge ranging from 2% to 5% of the outstanding loan amount. If you were lucky enough to get a loan with zero prepayment charges, you’re in an even better position!
Once you confirm the prepayment terms, the next step is arranging the funds. You can use your annual bonus, savings from cutting down on unnecessary expenses, side hustle earnings, or even withdraw from fixed deposits (if it makes financial sense). The key is to use surplus funds that won’t put a strain on your daily financial needs.
Axis Bank does not allow online prepayment, so you’ll have to visit the nearest branch with your loan account details, PAN or Aadhaar card, bank statements showing past EMI payments, and a cheque or demand draft for the prepayment amount. Once the payment is processed, ask for a loan closure certificate (for full prepayment) or an updated loan statement (for part-prepayment). This document is crucial as proof that your loan has been reduced or settled. Keep it safe to avoid any future discrepancies.
Should You Prepay or Invest?
One of the biggest dilemmas people face is whether to use extra money for prepaying a loan or investing it. The answer depends on which option gives you better returns.
If your loan interest rate is higher than the potential returns from an investment, prepaying is the better choice. However, if an investment can yield higher returns than your loan interest rate, you may want to invest instead. For example, if your loan interest is 12% but an investment opportunity offers a 14% return, investing might be the smarter move. But if you prefer being debt-free, go ahead with the prepayment.
Mistakes to Avoid When Prepaying
While prepaying your loan is a great financial decision, there are some mistakes you should avoid. First, check prepayment charges before making any payments—if the penalty is too high, it might not be worth it. Second, never use up all your savings just to prepay a loan. Keeping an emergency fund is crucial for unexpected expenses.
Another common mistake is forgetting to collect proof of loan closure. Always get a loan closure certificate or an updated loan statement to ensure everything is settled properly. Finally, if you’re already close to the end of your loan tenure, prepayment won’t save you much money, so evaluate whether it’s worth it.
Final Thoughts
Prepaying your Axis Bank personal loan is a smart move that can help you become debt-free faster and save on interest costs. The key is to do it at the right time, check for prepayment charges, and use surplus funds wisely. Whether you opt for part-prepayment or full foreclosure, it’s a step toward financial freedom.
Just be strategic, avoid common mistakes, and make informed decisions. Your future self will definitely thank you for it!
If you need help figuring out when and how to prepay, or whether you should invest instead, CredBuddha is here to make your financial decisions easier. We offer tools that track your EMIs, calculate potential savings from early payments, and give you tailored insights on loan management. Let us help you get debt-free sooner and smarter!
No more guessing—let’s get you to financial certainty!
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