Taking out a loan to finance a major purchase or investment requiring a large amount of funds is a common practice. One can get a loan for reasons like education, home purchase, renovations, debt consolidation, electronics, medical or emergency costs, or other unexpected expenses. There are many options available that can make the loan repayment process smoother and more manageable. Here are some types of loans and ways to make repaying loans easier:

Types of loans
There are two types of personal loans one can get: secured and unsecured. For a secured personal loan, the borrower must offer collateral or an asset of value, like a vehicle, home, gold, or shares, as an assurance to repay the amount. If one defaults, the lender can claim the asset. An unsecured loan, on the other hand, does not require any collateral deposit. Here, the borrower can pay the money as per the agreement, and if they default, the lender cannot claim any of their assets. However, defaulting on an unsecured loan can lower the credit score significantly, and the lender can also file a case against the borrower to recover the losses. An unsecured loan is the most common type of personal loan to finance weddings and vacations. Usually, an unsecured loan comes at a higher interest rate.

A common type of borrowing is student loans, which can either be federal or private. Federal loans come with more protection but also higher interest. Business loans are another common type, which can be categorized as working capital loans, term loans, and equipment loans, among others.

Alternative financing options
Apart from getting loans from financial institutions, one can also find other ways to finance purchases. For example, credit cards come with special rewards and benefits on certain expenses, including electronics that can be used to save money. Similarly, one can opt for a line of credit from a bank or borrow from friends or family members willing to lend a helping hand. The money borrowed in this way can help cover token payments during house bookings or even emergency healthcare expenses.

Ways to ease loan repayment
Choose automatic payments
One of the easiest ways to ensure timely repayment is to facilitate automated repayment. One can set up automatic payments through their bank or financial institution. By choosing this option, the borrower authorizes the lender to deduct the loan payments directly from their bank account on a specified date each month. This is incredibly convenient, reduces the risk of missing payments, and gives one peace of mind.

Make regular partial payments
When it comes to business loans, if agreement permits this approach, one can consider making partial payments every two weeks. This allows one to repay 13 months’ worth of payments at the end of the year (by making half-payments 26 times) instead of the standard 12 monthly payments. This lowers the principal amount each year. So, on a five-year business loan, one will be able to settle the loan about five months in advance.

Look for flexible repayment terms
One should pick a loan period that aligns with their financial situation. It is best to choose a lender that offers flexible repayment options. Many trustworthy banks and online lenders provide customers the freedom to customize their repayment schedules, giving the borrower enough time to easily repay the loan after accounting for individual financial constraints.

Seek lender discounts
When obtaining business loans, one should ask if the lender offers incentives for choosing electronic statements over postal ones. Some lenders may offer modest discounts for methods that reduce administrative costs. By taking advantage of these discounts, one can expedite debt repayment.

Plan repayment in advance
To ease loan repayment, especially for students with educational loans, one should plan ahead. First, one should consider their income sources for timely EMIs, establish a regular income strategy, and make prepayments to boost credit scores and avoid penalties. One should also be prepared for potential loan foreclosure. This proactive approach instills financial discipline and reduces worries while helping one understand the process better.

Explore loan forgiveness and repayment opportunities
Federal student loan borrowers may be eligible for loan forgiveness and repayment assistance, which cater to individuals in specific professions, such as teachers, public servants, and members of the armed forces. By making the most of these programs, one may be able to relieve their loan burden to an extent.

Utilize surplus earnings
Business owners can also ease the repayment of loans if they utilize their surplus profits, additional money on securing a new client, or high revenue due to a boost in sales. Using these funds to repay the loan can accelerate the process significantly. Even by making periodic additional payments, say, once every quarter, one can reduce their principal loan amount. In the event of a temporary cash-flow dip, having repaid the loan three or four months ahead of schedule can give one peace of mind. Additionally, as the net income of the business gradually increases, speeding up loan settlement can boost the business’s credit rating and help save money in the long run.

Explore all options
Before finalizing any loan agreement, it is crucial to conduct thorough research to evaluate all available options. One should take the time to explore various loan types and compare interest rates offered by different lenders. Additionally, one can ask about the available prepayment options and understand the terms and conditions associated with early repayment. Further, it is equally important to carefully read the fine print once the loan has been approved. Pay close attention to details regarding foreclosure procedures and any associated charges. For a student loan, one should check if they need to start EMI payments immediately after completing the educational course or if there is a grace period until they secure employment.