Whenever it comes to getting quick money for meeting your urgent financial needs personal loan is the first option that people usually think of. Personal Loans come extremely convenient especially during an emergency, and because of this easy availability their interest rates are usually higher than any other form of secured or unsecured loan.
No matter how handy and convenient the preposition of applying for a home loan sounds, there are always some speculations about borrowing money. As far as the personal loan is concerned the major questions that a borrower has are related to its service charges, interest rates and other fees that may be levied upon it. Foreclosure and prepayment of the personal loan are other two important things that keep people sceptical.
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Pre-Closure Charges of Personal Loan
Pre-closure is the process when one repays the loan before the loan tenure ends. Some lenders do levy a penalty for preclosing the loan. However, pre-closure at times does help in lowering the interest rates and debt burden. The banks have different lock-in periods before which one can close the loan. Moreover, the banks do charge a pre-closure fee to compensate on the interest amount lost.
Below is the table with personal loan pre-closure charges of the top banks in India.
|HDFC Bank||Allowed after 12 EMIs|
|ICICI Bank||Allowed after 12 EMIs||5% of outstanding Principal + GST|
|State Bank of India||Allowed at any stage||Up to 3% of the prepaid amount|
|YES Bank||Allowed after 12 EMIs|
|Axis Bank||Allowed after completion of 1st EMI|
|Bajaj Finserv||Allowed after payment of the 1st EMI|
|Citi Bank||Allowed after 12 EMIs||4% on total Outstanding Principal Amount|
|Kotak Mahindra||Allowed after 12 months from the date of first EMI. 30 days foreclosure intimation period is mandatory.|
|Standard Chartered Bank||Allowed any time after completion of 12 EMIs with 21 days’ notice to the Bank||5% of Outstanding Principal + Taxes|
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Procedure for Pre-Closing Personal Loan:
STEP 1: Visit the bank where your Personal Loan is active
STEP 2: Carry the necessary documents such as ID Proof, Bank statements mentioning the final clearance of the last EMI, Cheque or Demand Draft with which you will pay the entire balance amount.
STEP 3: The lenders usually charge some amount from the loan amount which must be paid along with the prepayment.
STEP 4: Once the entire amount is paid either through a Cheque or Demand Draft, the Bank will give an acknowledgement letter which must be kept for future reference.
Once all the steps are complete, the bank will send the loan agreement after a few days of preclosing the Loan.
Part Payment of Personal Loan
Repaying your loan amount is known as personal loan pre-payment or personal loan part pre-payment.
If at a point, you have a large sum of money and want to use it for repaying the loan early, that would result in either a reduction of the EMI or reduction in the loan tenure. To make a part payment of a personal loan, one needs to visit the bank and inform the same to them. Once your request is submitted, revised instructions will be given. One needs to continue to repay the subsequent EMIs as shared by the bank.
At any stage, closing personal loan the right way is extremely important as it may have an effect on your CIBIL Score. It is important to be aware of the procedures involved in properly closing the Personal Loan and at any stage you face an issue or have a query, the customer service of the Banks can help you get through the same.