How can I reduce my interest cost?

You can reduce LAMF interest by withdrawing only what you need, repaying as soon as cash becomes available and avoiding overdue or bounce charges.

Because interest is usually based on the daily utilised balance, even a part-payment can lower future cost immediately after it is credited.

Compare APR and fees before choosing a lender, maintain a repayment plan and avoid using the facility for long periods without a clear exit source.

Use the line in tranches

Do not withdraw money earlier than you need it simply because the credit limit is available.

For example, suppose you need ₹2 lakh next week.

At an illustrative annual rate of 10.5%, delaying that ₹2 lakh withdrawal by seven days saves approximately:

₹403 in interest

With an overdraft facility, timing your withdrawals can directly reduce borrowing cost.

Repay idle cash quickly

A part-payment reduces the balance used for future daily interest calculations.

Keep only the liquidity buffer you genuinely need.

Leaving surplus cash elsewhere while paying a higher loan rate can be inefficient.

Compare total cost, not rate alone

The advertised interest rate is not the only cost.

Other charges can include:

• Processing fees
• GST
• Pledge charges
• Renewal charges

For short borrowing periods, these costs can outweigh a small difference in interest rates.

Use the APR shown in the Key Fact Statement and estimate the cost for your own borrowing amount and duration.

Prevent avoidable charges

Make sure the linked account has sufficient funds before the monthly due date.

Also:

• Keep your contact details updated
• Respond to margin notices
• Respond to renewal notices
• Avoid failed auto-debits
• Regularise overdue payments quickly

Overdue and bounce charges increase cost without providing any additional borrowing benefit.

Create an exit plan

Before borrowing, identify the expected inflow that will repay the principal.

Examples may include:

• Salary surplus
• Receivables
• Bonus
• Asset sale

If the loan becomes a permanent outstanding balance, periodically compare its cost with alternatives and consider the risk of keeping your investments pledged.

Check the whole facility, not one number

A lower outstanding balance, higher limit, second loan or lender switch changes more than just borrowing capacity.

Review:

• Live LTV
• Collateral available for release
• Total monthly interest
• Facility expiry dates
• Transaction fees across all facilities

Choose the simplest structure that meets your need while maintaining a meaningful market-value buffer.

Information on this page is general in nature. Eligibility, approved schemes, LTV, rates and charges depend on the regulated lender's current policy and the final loan documents. This is not financial advice. The content is purely for educational purposes.