5 smart ways to use a personal loan to save money

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A personal loan isn't just for cash crunches. Used thoughtfully-to replace high-interest debt, secure a better rate, or tidy up repayments-it can cut interest costs and reduce monthly stress. Here's a quick primer to help you save money by borrowing smarter.

If you have multiple debts, especially high-interest credit-card balances or unsecured loans, a personal loan on comparatively better rates can replace them and bring down your overall interest burden. Converting a few small obligations into one big, manageable loan with better terms simplifies repayment and might save you a lot over time. Recent guidance on how to reduce EMIs and interest highlights that moving to better-cost debt via a personal loan or balance transfer can ease monthly stress.

While longer tenures lower the monthly EMI amount, they increase the total interest paid. But with a shorter tenure, you pay more each month, and less in interest overall. According to financial experts, when your income allows, choosing a short repayment period is one of the smartest ways to bring down total borrowing cost.

Not all borrowing is created equal. If you borrow for an expense that will directly enhance your earning capacity—like training or tools related to your profession—that may make financial sense. In such cases, the interest cost becomes part of investing in your future income stream. Across India, lenders are offering personal loans from approximately 9.99 % per annum to eligible borrowers.

One of the easiest ways to save is by securing a better interest rate upfront. Borrowers who have higher credit scores, low debt-to-income ratios and steady employment can get lower rates. Comparing several lenders, improving your credit profile, and negotiating can make a meaningful difference in borrowing cost, industry sources maintain.

Any extra payments reduce the outstanding principal and, thereby, the rate of interest applicable. Even in the case of a personal loan, being strategic-such as using bonuses, tax refunds, or windfalls to prepay part of the loan-can shorten tenure and save on interest. Most borrowers just don't think of this and hence end up paying much more than they need to.

A personal loan doesn't have to be just more debt; it can be a cost-saving tool if done with intentionality. Consolidating expensive loans, opting for a shorter tenure when you can afford it, using the funds for productive purposes, negotiating for the best rate upfront, and making prepayments when possible-all of these transform borrowing into a strategic financial move.