Learn all about the pre-closure charges for Personal Loan
Loans are a form of financial aid extended by banks to help you organise funds for different purposes. For instance, you can rely on Home Loans, Auto Loans and Personal Loans to buy properties, vehicles, and meet other financial requirements, respectively. Today, you can repay a loan conveniently in affordable EMI payments. But did you know that you can pay off the loan amount before the loan tenure ends with loan pre-closure facilities? Read on to learn more.
When you avail of a loan from a bank, you agree to pay off the amount borrowed along with interest across the tenure of the loan. However, if you can arrange funds to repay your entire loan amount in one go, you can do so. You can utilise a facility known as loan pre-closure and repay your debt entirely.
While you can close a loan prematurely, the lending bank incurs a loss on its investment. The bank passes on a portion of its losses on you, the borrower, by levying a loan pre-closure charge to compensate for the losses incurred by the bank. Typically, pre-closure charges for Personal Loans are higher if you decide to pay off your loan within six months from the date of sanction. If you close the loan towards the end of the loan tenure, the bank may levy lower charges or even waive off the pre-closure penalty.
While pre-closure consists of prepaying the entire loan amount, part prepayment of a loan allows you to prepay a portion of the loan amount. You can use your idle savings to prepay a small portion of your loan. This enables you to reduce the outstanding principal amount, and the interest payment portion is also reduced. While you can make several part prepayments, banks may limit the prepayment instalments at their discretion.
Charges associated with part prepayment differ from one bank to another. Most banks generally levy prepayment charges according to the tenure of the loan along with the applicable GST. Some banks permit a maximum of two part payments in a year, that too after completing six months of EMI payments from the date of loan disbursement into your savings account. You can use online Personal Loan EMI Calculators to understand the changes in loan EMI payments due to part prepayment.
At digibank, we offer high-value Personal Loans without any end-use restrictions. Get competitive interest rates and flexible repayment tenures of 5 years with your digibank Personal Loan. Also enjoy facilities like fast-track loan sanctioning, easy EMIs, part-payment, loan balance transfer and much more. You can apply for the digibank Personal Loans online from the comfort of your home and check the loan pre-closure charges under the terms and conditions section of the loan agreement.
Download the digibank mobile app on your smartphone. Launch the app and click on the "Get Personal Loan" link on the login page
*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.