Tata Capital Personal Loan Foreclosure Charges

Interest Cost Savings

Existing borrowers of Tata Capital 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 15 lakh at 11% p.a. for loan tenure of 5 years, then his EMI would be Rs 32,614 and the total interest payable would be Rs 4.57 lakh. However, if he repays the outstanding loan amount after a year, his total interest cost savings would be Rs 3.04 lakh. 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 a loan borrower. As Tata Capital Personal Loans are unsecured in nature, borrowers can prepay the personal loans to reduce the proportion of unsecured loans in the credit mix. You can boost your credit score by increasing your proportion of secured loans and thereby, increase your chances of availing another loan.

Increased EMI Affordability

Banks and non-banking financial companies (NBFCs) prefer lending to loan applicants whose total EMIs (including the existing EMIs and EMI of the proposed new loan) are within 50% - 60% of their monthly income. Hence, loan applicants exceeding this limit have lower chances of availing personal loans. Thus, existing Tata Capital Personal loan borrowers who wish 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 availing other loans.

Negative Impact on Liquidity

Many borrowers prepay their personal loans by liquidating their existing investments partially or in full. Doing so negatively affects their emergency funds which they could have used for unforeseen contingencies like medical emergencies, loss of job/income etc. Borrowers who prepay their personal loans by liquidating their existing investments may need to avail loans at higher interest rates to fulfil their financial goals or deal with unexpected situations. Hence, you should only opt for personal loan foreclosure if you have adequate 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 personal loan to other lenders offering lower personal loan interest rates.

Prepayment Charges

The Tata Capital Personal Loan foreclosure charges go up to 4.5% plus GST on the outstanding loan amount. Personal loan borrowers prepaying their loans have to bear the personal loan foreclosure charges, which lower their overall interest cost savings. Therefore, existing borrowers should opt for personal loan prepayments only if they are able to make substantial savings after deducting the prepayment/foreclosure charges.