The weight of the total interest on a loan might even seem like an impossible scenario to survive, but the point is simple. With proper planning, you can get your interest as low as almost 40% off the original amount.
A lot of people in India save a huge amount just by having better repayment habits and by getting their loans restructured.
Reasons Why Borrowers Pay More Interest Than Necessary
One of the main reasons people pay more interest is the long tenures, payment delays, or merely paying the minimum EMIs. These seemingly insignificant habits of spending money add up over time and contribute to the increase in the total cost.
Before you start learning how to reduce total interest, let’s see the effect of the EMI and tenure on the total cost.
How Loan Tenure Affects Total Interest
| Loan Tenure | EMI Amount | Total Interest You Pay |
| 5 years | Higher EMI | Lesser total interest |
| 7 years | Medium EMI | More total interest |
| 10 years | Lower EMI | Highest total interest |
This is why choosing a shorter tenure is one of the best ways to reduce costs.
1. Select a Shorter Tenure (Even If EMI Is Higher)
Initially, a shorter tenure might seem to be really hard due to the increased EMI that comes along with it. But it brings down the overall interest on the loan by a specific amount. Even reducing your tenure by one or two years can help you reduce total interest significantly.
2. Occasionally Make Ministerial Prepayments
Prepayments are very effective. In case you are just paying an additional amount of ₹1,000 or ₹2,000 on your loan every month, that would already lead you to a much lower outstanding amount, and hence, you will be charged less interest for the future.
This is a good time to practice if you get
- Salary bonus
- Incentives
- Festival gifts
- Freelance payments
Most NBFCs allow free prepayments. This makes it easier to reduce total interest without any charges.
3. Simply try to increase your EMI by 5–10%
Even a small increase in EMI amount can lead to a considerable saving. Let’s figure this out through a very basic example.
How EMI Increases and Reduces Total Interest
| EMI Increase | Result |
| +5% EMI | Faster repayment + less interest |
| +10% EMI | Much lower interest + shorter tenure |
This simple trick works great for people whose incomes increase steadily every year.
4. Switching to a Lender with a Lower Interest Rate
This refers to loan refinancing. Your loan is transferred from a lender charging high interest to one charging low interest.
Olyv is one platform that allows borrowers to easily compare lenders and switch to more favourable loan conditions. Olyv facilitates a fast, digital, and uncomplicated process so that users can save money without hassles.
If you have high-interest debt, then refinancing is certainly one of the most powerful strategies to cut the overall interest, thus making it one of the most effective methods for reducing total interest.
5. EMIs That Are Late or Missed Should Be Avoided
The consequences of late EMIs are,
- Penalties
- Higher interest rate
- Lower credit rating
These penalties will create hidden costs. On-time EMI payments will keep the interest at the same level and protect your loan journey.
6. Payments Can Be Automated
One of the advantages of making payments automatically is that you will not forget about the EMI dates. This prevents penalties and keeps your loan good. Most payment apps, including Olyv, provide easy auto-debit options so that borrowers are free from worry.
7. Don’t Increase Your Tenure Unless It’s Really Important
A lot of borrowers will increase their tenure just to lower their EMI. However, in the long run, this will result in a higher interest rate. So, always try to make your tenure as short as your budget supports.
This one decision can help you reduce total interest by a large margin.
Conclusion
Reducing your loan interest is not difficult. Small steps like choosing a shorter tenure, adding small prepayments, increasing EMIs slightly, and avoiding penalties can help you reduce total interest by almost 40%. Using smart tools and digital loan platforms like Olyv makes the process easier, transparent, and stress-free. With the right habits, you can finish your loan faster and save a significant amount in the long run.
