ICICI Personal Loan Preclosure Charges
|ICICI Personal Loan preclosure charges for salaried customers
|ICICI Personal Loan preclosure charges for MSE classified customers
|Nil – after 1st EMI payment (for loan amount up to Rs 50 lakh)
Note: Data as on 7th February 2024
Benefits of Preclosure of ICICI Personal Loan
Interest Cost Savings
Existing borrowers of ICICI Bank Personal Loan can save on their interest costs by opting for personal loan prepayments. For example, if a borrower avails a personal loan of Rs 6 lakh at 12% p.a. for loan tenure of 4 years, then his EMI would be Rs 15,800 and the total interest payable would be Rs 1.58 lakh. However, if he repays the outstanding loan amount after a year, his total interest cost savings would be Rs 93,103. Note that prepaying a personal loan in the initial stages of its tenure would result in higher interest cost savings.
Lower Proportion of Unsecured Loans in Credit Mix
Credit mix is the ratio of secured and unsecured loans for any individual. Since ICICI Bank Personal Loans are unsecured in nature, prepaying the personal loan will lower the proportion of unsecured loans in the credit mix. An increased proportion of secured loans helps to improve your credit score and thereby, increase your chances of availing another loan.
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Increased EMI Affordability
Lenders prefer lending to loan applicants whose total EMIs (including both existing EMIs and EMI for the proposed new loan) are within 50% – 60% of their total gross/net monthly income. Hence, loan applicants exceeding this income limit have lower chances of availing personal loans. Thus, existing ICICI Bank Personal loan borrowers wishing to avail other loans can prepay their existing personal loans to bring down their EMI/NMI ratio to within the 50% – 60% bracket and thus, improve their eligibility for other loans.
Drawbacks of Preclosure of ICICI Personal Loan
Negative Impact on Liquidity
Many borrowers use their existing investments to prepay personal loans. This negatively affects their emergency funds which could have been used for contingencies like medical emergencies, loss of job/income etc. Borrowers who prepay their personal loans using existing investments may end up availing loans at higher interest rates to fulfil their financial goals or deal with emergencies. To avoid this problem, you should opt for personal loan preclosure if you have sufficient emergency funds. Personal loan borrowers can also bring down their repayment burden and interest costs by exercising the personal loan balance transfer option and transfer their existing loan to another lender offering reduced personal loan interest rates.
The ICICI Personal Loan preclosure charges are 3% plus applicable taxes on the outstanding principal amount. The bank permits foreclosure after the 1st EMI payment. Borrowers who have paid 12 or more EMIs do not need to pay any ICICI Personal Loan preclosure charges. Borrowers foreclosing their loans have to bear the personal loan preclosure charges, which lower their overall interest cost savings. Therefore, loan borrowers should opt for personal loan prepayments only if they are able to make substantial savings after deducting the prepayment/foreclosure charges.