A personal loan is a popular loan option among all other loans as you can get the funds without any security. As the risks are higher for the lender in a personal loan, the interest rates are also higher. As a result, many feel it a burden to manage along with the monthly expenses. A huge sum of money is paid towards interest to the lender. You might now want to know if there is any way to get out of this debt trap sooner, or is there any way to reduce the burden so that life can move normal?

Repayment on a personal loan should be consistent as any default can hurt your credit score. There is no shortcut to reduce your personal loan burden, but by taking some smart steps, you may be able to pay off your loan without much difficulty.

Step #1: Debt Snowball Method

This is a popular method that is suggested by financial experts to pay off debts more efficiently. Imagine rolling down a snowball from the top of a mountain. It gathers more layers of dust and particles as it rolls down and becomes a huge ball upon reaching the bottom. Likewise, you need to focus on smaller debt and go on to pay off the bigger ones. The small loans will come on top of the list and higher loan amount will come at the end.

Step #2: The Stack Method

This is another effective method that is adopted by borrowers to pay off their debts. Assuming you have multiple debts with different rates of interest, the priority of repayment should be given to the costlier loan i.e. higher interest loan. After paying off the higher interest rate loan, you can move on to the lower interest loan so that you may feel relieved of the debt burden.

You can choose between the above two methods based on your convenience and debts. Following are some of the other effective ways using which you can reduce your personal loan burden.

Step #3: Prepay Your Personal Loan

Personal loans can be burdensome especially when it carries a higher rate of interest. You can reduce the loan burden by prepaying the loan. On prepayment, you just repay only the outstanding balance. However, this may incur a fee of a certain percentage of the loan amount.

Prepayment on your persona loan is beneficial only if you do it at the initial stage of the loan tenure after the lock-in period which may range between 6 months to 12 months. The EMI is a combination of both interest and principal amount. The EMI is structured in such a way that more amount is deducted for interest payment and less for the principal. Hence, after crossing half of the repayment period, if you want to prepay the personal loan, you would be having more principal amount than interest payment which is not beneficial to you. Try to make the pre-closure at the earliest to enjoy more benefits.

Step #4: Personal Loan Balance Transfer

This is the method of switching your personal loan from existing lender to another lender for a lower interest rate. This is like taking out a new loan for a lower interest rate and paying off the higher interest rate loan. You are allowed to do this personal loan balance transfer only after you have completed the lock-in period. Much similar to prepayment of the personal loan, a balance transfer is beneficial only at the initial stage of the loan tenure.

You must also be aware that balance transfer will involve various fees such as prepayment charges from existing lender and processing fee from the new lender. Calculate all the fees, interest rates, loan repayment on the new etc., to check how much you save out of the balance transfer. Only if you are convinced that a personal loan balance transfer is beneficial, you can make the switch. 

Balance transfer has another advantage that you can either increase or decrease the loan tenure with the new lender. If you feel that EMI is burdensome, you can increase the tenure to pay less on EMI. Similarly, if you want to pay off the debt faster, you may decrease the tenure and increase the EMI amount.

Step #5: Part Prepayment

There are a handful of lenders who allow you make part prepayment on the personal loan. Check with your lender if there is such feature on your personal loan. A sudden hike in the salary, bonus or savings can help you make part prepayment on your personal loan which in turn can reduce the payment toward interest. There may be a small percentage of fee for making part prepayment.

Step #6: Debt Consolidation Loan

If you have too many debts and are paying multiple EMIs, you may have to shell out a huge amount out of your income each month. You can take a debt consolidation loan that helps pay off all debts and make a single payment each month to a single lender.

It can reduce your personal loan burden as you will be consolidating as debts. The tenure may now be longer as you would be taking a huge sum. However, the loan burden would be less than before as you would be paying for a single loan.

Step #7: Secured Loans to Pay Off Personal Loan

Secured loans such as home loan, gold loan, loan against property, loan against insurance schemes, mutual funds, etc., may carry a lower interest rate than a personal loan. You can take any one of the secured loans and pay off the personal loan which carries a higher interest rate. Your new loan will have a lower EMI at the same tenure which can give you a sigh of relief from the personal loan burden.


It’s understandable that having a personal loan can pinch your pocket when you are caught in the situation of managing multiple financial responsibilities. Whatsoever may be the reason, be regular in repayment in order to keep your credit health intact.