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Home Discover Journals Is it Right Time for me to prepay my Home Loan?

Is it Right Time for me to prepay my Home Loan?

By Finserv MARKETS - Apr 4,2019
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Right time for Prepayment of Home Loan

Do you have an outstanding home loan and are you planning to pre-pay it in lump sum? Owning a home is a big achievement, and availing a loan to do so is a big-time commitment. The tenure of the loan and the amount of the loan are both massive and any borrower wants to close it at the earliest given the magnitude of it. Home loan prepayment can lead to financial benefits as it reduces the burden of paying huge interest rate and the money can be used for other investments. In India, the average tenure for this loans is 10 years, therefore, people prefer prepaying at any given opportunity.

When is the right time for Home Loan Prepayment?

You can prepay the loan only when you have surplus cash. The surplus cash comes in when the flow of income rises. In such a scenario, the you can either clear the loan in one go or increase his EMI amount and shorten the tenure to avoid any closure charges. Banks normally do not encourage pre-payment, therefore, they penalise you with a pre-payment charge. Another option is that you pay an extra hefty EMI annually which every bank allows without any additional costs. So, the final decision to prepay or to shorten the loan period, stays with borrower, who decides what suits him best.

How to prepay Home Loan?

Most banks do not have the facility to prepay online. So, the borrower must go personally or send a representative to close the loan. There are certain things that the borrower must keep in mind before loan foreclosure, they are as follows:

  • The borrowers must take the acknowledgement from the bank once the payment is done. The acknowledgement should be a detailed receipt mentioning the outstanding debt, revised tenure of if it has been foreclosed. The entire transaction should be stamped and signed by the lenders.
  • If the previous monthly instalments were getting debited by post-dated cheques then the borrower has to issue fresh cheques mentioning the revised EMI.
  • The borrower must mandatorily mention his name, account number of the home loan, his contact details and other crucial details behind every cheque.
  • Some banks insist on checking the source of fund for the loan prepayment. In that case, carry the bank and transaction statements of the last 6 months.
  • The borrower must be alert that all these transaction changes are updated in his CIBIL score. Usually, they’re up within 45-60 days. Should there be a lag, the borrower can raise a concern with the said bank.

The time for loan prepayment entirely depends on how the borrower wants to spend his money and how the market favours his decision. Only after weighing all these options, they should take this step and evaluate if this move is profitable for them or works in their favour in the long run.

Looking to transfer your existing home loan or applying for a new one? If yes, then you should definitely choose Bajaj Finserv Home Loan at Finserv MARKETS. With us, transferring your existing loan or applying for a new one is easy, quick and completely hassle-free. What’s more? The entire process is online and comes with attractive benefits, features and interest rate. So why wait? Head over to Finserv MARKETS, today!

“Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs . What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.”

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522