Home Discover Journals What happens if I want to return my personal loan before its due date?

What happens if I want to return my personal loan before its due date?

By Finserv MARKETS - Aug 23,2019
Views Icon239 Views 5 0 Comments

(1 page reviews)

Benefits of Loan Prepayment

Nishant and Disha were eager to repay their Rs. 25 lakh marriage loan well before its 20-year tenure ended. Sticking to their plan, they prepaid the loan within four years. They did this by using their yearly bonuses of Rs. 2.2 lakh, incentives of Rs. 65,000 and monthly surpluses to make part payments regularly. Eventually, the couple saved an estimated Rs. 21 lakh in interest.

Pre-payment might seem like a difficult task, but with deliberate planning and a lot of discipline, it is not an impossible target to meet. About 65-70% of home loans are repaid in seven to nine years.

What is loan prepayment?

Prepayment is when you pay off an outstanding loan amount entirely or partially before the defined due date in the loan contract. If prepayment can be done early, the customer ends up saving a large amount paid on interest. A personal loan, such as a bike loan or a wedding loan, usually has a lock-in period of about one year, after which the entire outstanding amount can be prepaid.

 

Loan Prepayment Calculation

Source: Economic Times

 

Benefits of loan prepayment:

Paying up for your loan in advance is rewarding. Here’s what you may not know about what happens when you pay off your loan before its due date:

Credit rating worthiness

Paying back your personal loan in advance does not immediately affect your credit rating, but in the long run a full prepayment shores up your credit rating. On the other hand, part payment of a loan has no effect on your credit rating although it can reduce the stress of the entire loan burden on you. While trying to pay off a loan early is a good move, it might not always be financially wise. Ensure that you have performed basic math before prepaying your loan and read the terms and conditions of your loan agreement. You must also consult with your lender if you are doubtful. With a Personal Loan, available on Finserv MARKETS, you can get an instant personal loan with minimal paperwork and give your shot at prepayment.

Savings on interest

If you are able to prepay your loan relatively early into the tenure of the loan, you will be saving a lot on the interest. Some banks do have penalty rates between 3-5% if a customer decides to prepay a loan. However, some public and private sector banks do not charge for prepayment. This situation is ideal to make use of idle cash and take advantage of simple economics.

Boosts your morale

Paying off any loan leaves the borrower with a positive psychological impact. It provides a sense of relief since paying for a high-interest loan can be taxing. Otherwise, a personal loan is stuck on a permanent to-do list if it is not paid for at the earliest possible. If you are thinking about a trip to your dream destination, renovating your home, planning a wedding, or dealing with medical costs, you can get a free financial Fitness Report from Finserv MARKETS to protect your loan liability.

How can you ensure prepayment acknowledgement?

Once you hand in your entire loan payment, make sure you collect a pre-closure acknowledgement receipt. Avoid using cash to pre-close as it may be misused. With its hassle-free registration, you can apply for a Personal Loan on Finserv MARKETS for up to 25 lakhs depending on your eligibility for loan.

Are you in need of a personal loan?

You might be holding off from buying something you are in need of. Many young citizens opt for a bike loan, car loan, wedding loan and elder citizens are interested in home loans. Financial experts usually advise against loaning for a week long stay at the beach or a new TV. Invest in yourself and your family now by applying for a Personal Loan on the Finserv MARKETS platform.

Conclusion

Personal loans are in great demand in India mostly because of the flexibility they offer. People take personal loans to protect themselves from emergency expenses or home improvement or simply to travel. As the interest rate is one of the deciding factors in opting for a personal loan, it is important to know how prepayment of a loan can benefit you. Bike loans, travel loans and wedding loans are increasingly becoming the only way for some individuals to buy what they need. Prepayment of loans, in some cases, helps them against interest rates.

“Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere”!

Comments

Connect with Us
Connect with Us

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