- If you are thinking of pre-payment of a personal loan then you must first refer to the bank policies for pre-payment of personal loan.
- This will help you to know whether the pre-payment of a personal loan is a good idea or not.
- A personal loan is one of the most demanded loans in the country mainly because of its uses and the easy repayments offer attached to it.
- A personal loan is a kind of easy solution to a person’s common financial problems such as wedding expenses, buying a new gadget, renovation of home, etc.
- Apart from the interest rates of the loan a person should also be aware of the pre-payment charges of the personal loan.
Pre-Payment in Full
- The pre-payment of personal loan does have charges attached to it.
- If you think of making full payment of your loan before time, it is good to do it as soon as possible in the earlier stages.
- While availing personal loans you should carefully read the terms and conditions of the lender.
- Most of the banks have a provision of a lock-in period of one year, only after which you can pay off the entire outstanding amount of the loan and a big part of the interest cost will be paid by you during the lock-in period.
Effects of pre-payments
- However, to pay off your debts whenever your finances allow can be good for you but the benefits of the earlier payment of personal loans depend upon various other factors.
- However, there are various benefits of pre-payment as it can bring metal peace to a person by releasing him from the burden of debt.
- Banks do not allow pre-payment of the personal loan during the lock-in period.
- Generally, banks charge the penalty for the pre-payment of a loan too.
- Some banks charge higher foreclosure amounts but this charge usually ranges between 1 to 2 percent of the principal outstanding amount.
- However, it is advisable that if you wish to pay the full loan amount before the loan tenure is over, then you should do it at earlier stages because the sooner you pay the more you will save on overall interest payouts.
- Different rates on a personal loan