IndusInd Bank Personal Loan Preclosure Charges
|Prepayment Charges||Salaried: 4% of the principal outstanding after repayment of 12 EMIs.|
|Self Employed: 4% of the principal outstanding after repayment of 6 EMIs|
What are the Benefits of Pre-closing your Personal loan?
Increased EMI Affordability
Lenders offer loans to applicants whose total EMI is within 50-60% of their total monthly income. This also includes their existing EMI and the EMIs for new loans. As a result, applicants exceeding this income limit have less chances of availing personal loans. However, consumers can easily reduce their EMI/NMI ratio and improve their eligibility for availing other loans by prepaying their existing personal loans.
Savings on cost of interest
Consumers availing personal loans can also save on their interest costs by prepaying the loan amount that they would have otherwise incurred during the loan tenure. For instance, if you availed a personal loan of Rs 10 lakh at 13% p.a. And repayment tenure of 5 years, then the EMI would be Rs 22,753 and total interest would be Rs 3.65 lakh. However, consumers can easily save on the cost of up to Rs 2.44 lakh if they repay the outstanding personal loan after a year.
Reduced Share of Unsecured Loans in Credit Mix
Credit mix is the ratio of unsecured and secured loans. By prepaying the outstanding loan amount of IndusInd Bank Personal Loan, consumers can reduce the proportion of unsecured loans in their credit mix. An increased share of secured loans will help improve their credit score and increase the chances of getting another loan.
Also Read: How you can build or rebuild your credit score with Step UP Credit Card co-branded with SBM Bank India Ltd.
What are the Disadvantages of Pre-closing Personal Loan?
Negative impact on liquidity
Many borrowers exhaust their existing investments to prepay their personal loans, which in turn, affects their emergency funds that they save for various emergency situations. Exhausting the existing investments can force the borrowers to avail personal loan at higher interest rates to meet their financial needs or emergencies. In that case, consumers should consider reducing their prepayment burden and cost of interest by using the personal loan balance transfer facility and transfer their existing loan to lenders offering lower personal loan interest rates.
IndusInd Bank charges a prepayment fee of up to 4% on the outstanding personal loan amount. Borrowers who want to pre-close their personal loan accounts can do so by paying the prepayment charges, which will however, reduce their interest cost savings. For that reason, consumers who want to prepay their personal loans should consider opting for it only if their net savings are significant enough after accounting the prepayment charges.