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RBL Bank Personal Loan Preclosure Charges
| Preclosure/Foreclosure Charges | Between 13 to 18 months: 5% of outstanding principal |
| After 18 months: 3% of outstanding principal | |
| After 12 regular EMIs: NIL |
Benefits of RBL Bank Personal Loan Preclosure
Increased EMI affordability
Banks usually consider lending to applicants whose EMI/NMI ratio is within the limit 50-60% of their total monthly income, that includes their existing EMIs and EMIs for new loan. Applicants exceeding this limit have fewer chances of getting their loan application approved. Thus, existing personal loan borrowers of RBL Bank can improve their loan eligibility by reducing their EMI/NMI ratio through prepaying their existing personal loan.
Lower proportion of unsecured loans in credit mix
Credit mix is the ratio of secured and unsecured loans. RBL Bank personal loan are unsecured loans and therefore prepaying the personal loans would help applicants lower the proportion of unsecured loans in their credit mix. This will further help borrowers improve their credit score and increase their chances of availing loans in the future.
Savings on cost of interest
Personal loan borrowers can also save on the total interest cost that they would have to pay during the loan repayment period. For instance, if a borrower avails a personal loan of Rs 5 lakh at 17.50% p.a. and repayment tenures of 3 years, the EMI would be Rs 17,951 and total interest cost would be Rs 1.46 lakh. That said if a borrower pays the outstanding loan amount after 1 year, he can save interest cost of up to Rs 69,512.
Disadvantages of RBL Bank Personal Loan Preclosure
Prepayment charges
RBL Bank preclosure charges can go up to 5% on the outstanding loan amount in cases of personal loans availed at fixed interest rates. Borrowers who wish to pre-close their personal loan accounts can do so by paying the prepayment charges, which will also reduce overall interest cost savings. So if a borrower should only prepay loan if he has enough net savings after accounting the personal loan pre-closure charges.
Negative impact on liquidity
Most personal loan borrowers exhaust their existing investments to prepay their personal loans. This negatively impacts their emergency savings that they would have used in financial emergencies. Therefore, this can also force a borrower to avail loans at higher interest rates to meet financial needs. In this case, borrowers should only opt for personal loan pre-closure if they have additional funds or have sufficient savings. Moreover, personal loan borrowers can also reduce their repayment burden by opting for a personal loan balance transfer facility i.e., by transferring their existing personal loans to other lenders offering lower personal loan interest rates.
FAQs
Q1. What are the foreclosure charges of RBL Bank Personal Loan?
Ans. RBL Bank does not allow prepayment until 12 regular EMI payments are made on its personal loans. However, if you wish to foreclose your personal loan between 13 to 18 months, the foreclosure charges are 5% of the principal outstanding amount. If you foreclose your loan after 18 months, the bank charges 3% of the principal outstanding amount. Also, RBL Bank does not charge anything on foreclosure in case you have paid 12 EMIs and are foreclosing the loan using own funds.
Q2. What is RBL Bank personal loan interest rate?
Ans. RBL Bank personal loan interest rate starts at as low as 17.50% p.a.
Q3. What are the minimum and maximum loan amounts with respect to RBL Bank personal loan?
Ans. The minimum and maximum loan amounts for RBL Bank personal loan are Rs. 1 lakh and Rs. 20 lakh, respectively.
Q4. What is the tenure option available on RBL Bank personal loan?
Ans. RBL Bank personal loans come with a flexible repayment tenure ranging between 12 to 60 months.
Q5. Which method of interest calculation is used by RBL Bank to calculate the interest payable on its personal loans?
Ans. RBL Bank uses of the reducing balance method to calculate the interest payable on its personal loans. According to this method, interest is calculated only on the outstanding loan amount and not on the entire loan principal amount borrowed initially.
Q6. How long does RBL Bank take to approve personal loans?
Ans. Once the loan application is submitted and all the relevant documents are received and verified, RBL Bank usually takes up to 5 working days to disburse a personal loan. This time period may of course be longer depending upon the applicant’s profile, loan amount, etc.