3 Facts to Consider Before Repaying Loans


Bangalore: You have too many credit cards and many loans like house and car loan and your post box during the month end awaits you with a list of credit card bills and EMI remainders, then you must realize the fact that too many loans may put you into trouble in a longer run. So you should sit and prioritize your loans which you must pay first than others, as reported by Amit Shanbaug of ET Bureau.

Power of Prioritizing Loans

Pankaj Maalde, Head of Financial Planning from ApnaPaisa.com suggests if you have multiple loans then you must know which loan you should repay first. In order to do so, you must always go first for the costliest loan. Costliest loans are not the one which ask for the highest amount of Easy Monthly Installments (EMI) but the one which charges higher interest rates. For example a credit card loan will charge you 35-40 percent annually whereas a housing loan will charge 12-13 percent; hence it’s wiser to repay the credit card loan first, as told to ET.

Once you prioritized your loans on the basis of interest rates, you realized that two loans have similar interest rates. In such a case you must pay off the loan with longer tenures sooner. As the loan with longer term period will have installments added interest rates which eventually will increase your cost burden on debts. Another vital fact about your multiple loans is that try to repay the loan with no tax benefits sooner than the others.