As 2025 comes to a close, many borrowers are wondering: Should I repay my loans before 2026 begins? The answer depends on your financial goals, loan types, and overall repayment strategy. Clearing loans before the new year can give peace of mind, but it’s important to weigh the pros and cons.
Benefits of Clearing Loans Before 2026
1. Reduced Interest Burden
Prepaying loans can save you a significant amount in interest costs, especially for high-interest loans like personal or credit card loans.
2. Improved Credit Score
Closing outstanding loans shows lenders that you’re a responsible borrower, boosting your creditworthiness for future needs.
3. Financial Freedom in 2026
Starting the year debt-free gives you more flexibility for investments, savings, or new goals.
4. Lower Stress During Uncertainty
With global economic shifts, keeping debt low reduces financial risk.
When You Shouldn’t Rush to Repay
Home Loans with Tax Benefits: If you’re enjoying deductions under Section 24(b) and 80C, keeping a home loan might be beneficial.
Low-Interest Loans: If your loan rate is lower than potential returns from investments, early repayment may not be the smartest move.
Liquidity Concerns: Don’t use all your savings to close a loan. Always keep an emergency fund.
Smart Tips for Year-End Loan Planning
Clear High-Interest Loans First – Prioritize personal loans and credit card dues.
Check Prepayment Charges – Some banks charge fees for closing loans early.
Balance Transfer Options – Shift to lenders offering lower rates if full repayment isn’t feasible.
Review Your Cash Flow – Ensure you still have enough liquidity after repayment.
FAQs
Q1. Should I prepay my home loan before 2026?
Only if you can afford it without affecting savings, as home loans also provide tax benefits.
Q2. Which loans should I clear first?
Focus on high-interest unsecured loans like personal loans and credit card balances.
Q3. Is it better to invest or repay loans?
It depends—if loan rates are higher than investment returns, repayment is better.
Q4. How does loan prepayment affect credit score?
It improves your credit score as outstanding liabilities reduce.
Published on : 3rd September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share