There are important occasions and essential big-ticket purchases that we try to accumulate our savings for. But at times, despite our best efforts, there might be a gap between our budget and the purchases we desire to make. To fill such financial gaps, Indians today are increasingly making the most of a variety of loans, particularly personal loans. In fact, according to a recent survey by Home Credit India, as many as nearly half of all Indians are open to taking a loan to improve their lifestyles.
The advantage with personal loans is that they grant immense flexibility when it comes to the matter of repayment. A loan amount can be paid off over a relaxed period of time. However, sometimes changing financial circumstances can also lead to the foreclosure of a personal loan. Simply put, the foreclosure of a personal loan is when the balance loan amount is paid off in one go, either by the lender or by the borrower.
It is important to note that pre-closing or foreclosing a loan ahead of its stipulated time period attracts foreclosure charges on your personal loan. To ensure that your foreclosure process is smooth and foreclosure charges are minimal, make sure to opt for the right lender.
When the Bank Forecloses the Loan
When you avail a personal loan from a lender, it is accompanied by an agreement that the loan amount will be repaid within a time period of your choice. In order to ensure this agreement is upheld, borrowers are asked for collateral at the time of availing the loan. As long as the EMI payments are being made, the loan remains in the state of repayment.
However, it is possible that a borrower might find himself in a position whereby he can no longer make EMI payments for the personal loan. In such a case, the bank must proceed with auctioning off the borrower’s collateral in order to repay the balance loan amount. Once this outstanding payment is settled, the bank initiates the foreclosure of the person loan account.
When the Borrower Forecloses the Loan
There is another important reason why a loan might be foreclosed. The borrower, for instance, might find himself in a financial position by which he can pay off his entire balance loan amount immediately. Due to a desire to free himself of debt, the borrower might choose to opt for foreclosure of the personal loan himself.
However, while it might at first seem like the obvious plan of action, borrowers should make sure to peruse the appropriate terms and conditions associated with the foreclosure process. In particular, they should be well informed of the foreclosure charges on personal loans. In addition, clarifying a few important details about the foreclosure can make the process that much simpler. Let us take a closer look.
What are the foreclosure charges on personal loans?
Firstly, before availing a personal loan, it is important to ascertain if the lender has a provision for foreclosure at all. If the lender does have a provision for foreclosure, it is important to know the expected foreclosure charges on the personal loan. With some lenders, this figure can go as much as 6% of the principal amount that has to be paid.
In the case of the convenient personal loans available on Finserv MARKETS, the foreclosure charges are a mere 4% + applicable taxes, on your outstanding principal. The personal loans available on Finserv MARKETS are particularly popular due to their efficiency, reliability and convenience. Those opting for personal loans on Finserv MARKETS can rest assured that full transparency of personal loan interest ratesand charges will be maintained throughout. You can easily opt for loan amounts of up to Rs. 25 lakhs at attractive interest rates and be assured of no hidden charges!
Some Facts on Foreclosure of Personal Loan
Apart from the foreclosure charges described above, here are a few points that borrowers should keep in mind about pre closing their personal loans:
- Most personal loans typically come with a lock-in period of about a year. It is only after this time period that a borrower is allowed to foreclose a personal loan.
- Make sure that foreclosure is the most cost-effective way for you to repay your personal loan. It is best to calculate the outstanding amount you will pay in remaining EMIs (if you let the loan continue) and compare it with the amount you will have to pay if you foreclose the loan and add the foreclosure charges. Only if the latter is a more economical option should you go ahead with it.
- When contacting the lender for a foreclosure, make sure to keep documents such as your identity proof, your loan account number and/or a cheque handy. These will help facilitate the balance loan amount payment part of the process.
Whether it be to fund a travel plan or to finance a wedding, personal loans serve a variety of purposes for Indians everywhere. Even if you do decide to foreclose one ahead of time, it is essential to be associated with a lender that can make the foreclosure of a personal loan simple and pain-free.
This is made possible with the personal loanavailable on Finserv MARKETS, with loan amounts of up to Rs 25 lakhs and repayment tenures ranging from 12 to 60 months. Moreover, your personal loans can get approved in 3 minutes flat and reflect in your bank account within 24 hours.