What Is Loan Prepayment?
You can clear off your
personal loan fully or partly before the actual tenure of the loan ends. If you see a lump sum accumulating in your account, you can use it to prepay your loan.
What Are The Benefits of Loan Prepayment?
When you have taken a loan, it is quite tiring to pay an interest amount every year. So, it will be a good idea to prepay your loan
Full prepayment of your current loan is considered positive and has a positive impact on your CIBIL™ score .
It will help you to become debt-free. A debt-free life is good, since it helps you to be stress-free, leaves you with more money in your account, helps you to get financial independence earlier, and mitigates the risk of financial crisis.
What Is Personal Part Prepayment
Part prepayments also bring down the interest rates on loans.
Post making your prepayment, you can maintain the same loan tenure and reduce your EMIS or pay the same EMIs and shorten your loan duration.
But, part prepayments are effective only when you pay a lump sum.
Also, if you have prepayment charges, paying partly will have a negligible impact on your EMIs.
Most importantly, some banks do not allow part prepayments on personal loans, so find out the prepayment rules and conditions before you apply for a personal loan.
Can The Personal Loan Be Prepaid Without Any Prepayment Charges?
Yes, top lenders allow you to prepay without prepayment charges. You can apply for a personal loan prepayment after the lock-in period expires.
Some of the top banks with nil prepayment charges are:
Banks
Interest rates for personal loans
Whether Prepayment Facility Is Allowed
PNB
8.45%
Allowed
Corporation Bank
8.90%
Allowed
Andhra Bank
8.90%
Allowed
Union Bank of India
9.30%
Allowed
Federal Bank
10.49%
Allowed
Tata Capital
10.49%
Allowed after 6 months
Muthoot
14.00%
Not Allowed
Syndicate Bank
12.40%
Allowed
Indian Bank
8.50%
Allowed
Karur Vysya Bank
8.70%
Not Allowed
Some banks allow prepayment with nil charges if you satisfy specific conditions. Some of them are as follows:
SBI: If you close an old personal loan from SBI to get a new personal loan, then you will not be charged for prepaying your old personal loan
ICICI Bank: ICICI bank does not offer a part prepayment facility, but it offers a waiver on the prepayment if you have paid your EMIS on time for 12 months.
Yes Bank: Yes Bank does not charge any prepayment fees after 48 months of the personal loan duration if only 25% of the principal amount is outstanding.
Axis Bank: Axis bank does not levy any foreclosure charges on prepayment. But, if you prepay during the lock-in period of 6 months, you will be levied a foreclosure fee of 2%.
