Personal Loans provide incredible flexibility in terms of use, tenure, and repayment. PLs, as they are commonly referred to, are a form of lending which do not require any asset to be pledged as collateral to serve as security for a loan. Besides, online application for a Personal Loan is easy and requires less paperwork with flexible EMIs for repayment. Remember, every EMI has a portion of principal and interest, so loan without interest EMIs may not be possible.
Personal Loans can be beneficial in times of extreme financial need, such as for an emergency medical procedure, home maintenance and to plan a wedding. If you have disposable cash, you can consider pre-closing your loan and move on. Doing so may result in a nominal prepayment penalty. This article outlines the variables affecting Personal Loan foreclosure charges.
Financial institutions are the best options for Personal Loans since they can customise loans to meet your needs and requirements. Contact a reliable NBFC to learn more about Personal Loan requirements.
What does “Pre-Closure” mean?
Though there are different types of loans available, a Personal Loan is best when life challenges you. You can repay the loan at the earliest. A pre-closure or foreclosure is exactly what it sounds like: the full repayment of your debt in one instalment before the due date.
The absence of high penalties for pre-closures of a Personal Loan significantly reduces the amount and EMI for the debt. Prepayment requires a penalty charge, so it is always a good idea to read the terms and conditions carefully before closing.
Is It Possible to Pay Off Your Personal Loans Early?
You can obtain loans from financial institutions based on your financial needs. You can also foreclose the loan sooner than anticipated if you can repay it over time. Although loan foreclosure is ideal for you, lenders may impose fees if the loan is repaid early.
As said before, there may be a nominal fee involved. Additionally, terms and conditions and Personal Loan requirements differ from one lender to another.
The benefits of a loan pre-closure are listed below:
● Faster debt freedom
● Savings on interest outflow
● Increased credit score
Pre-closure Process
Loans can be paid off after a predetermined lock-in time. Part payments help reduce the total amount that must be repaid by reducing both the initial amount and the amount of interest, depending on your ability to pay. When the amount being prepaid is small, part payments frequently function more effectively.
Pre-closing a Personal Loan may not be an uphill task. The procedure can vary from one lender to another. It becomes essential that you fully comprehend it before applying for a Personal Loan from a financial institution.
Some factors that affect Personal Loan pre-closure are:
● Submission of complete loan-related documents
● Submission of your proof of identification
● Bank statement reflecting the clearance of the last EMI
Paying off personal debts boosts your morale while reducing the monthly financial commitment. The prepayment fee is unquestionably a tiny price to pay in that context, given that prepayment can help you become debt-free well before the completion of the actual loan repayment term. Calculating may help you decide whether paying off the Personal Loan early is a good plan.
Following the foreclosure, the lender refreshes the credit report with CIBIL, which keeps track of all your credit records and statements. This stage is essential to make sure the procedure is finished.
Prepayment Fees
Prepayment fees are levied to compensate for the possible income lost by the financial institution. This fee could differ significantly between providers. Some financial institutions may offer no prepayment penalty after three years, while others may offer steep discounts after a certain amount of time.
It is recommended that you take into account prepayment fees against interest rates. You should select the prepayment option if the prepayment fees are low but the interest rate is high. You can also calculate the benefits of prepayment using a prepayment calculator.
Bottom LinePre-closing your debt should be thought of in terms of when rather than why. When it comes to closing your loan, timing is everything. When estimating your income, consider both the benefits and drawbacks. Of course, paying off your loan without interest component can greatly help you become debt-free and live life worry-free about having to repay high amounts.