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Introduction

HDFC Bank was incorporated in 1994 with the mission to be a world-class banking institution. Today, the bank boasts of a wide network of 5,430 branches and 15,292 ATMs across the nation. The Housing Development Finance Corporation Limited (HDFC) is known to be the first bank to have an approval from the Reserve Bank of India (RBI) for setting up a private sector banking corporation.

The bank continues its functions intending to build sound customer franchises across unique businesses. It aims to be a preferred provider of banking services for various retail and wholesale customer verticals. It has been achieving steady growth with consistent profits and a healthy risk appetite. HDFC bank is known to have the highest level of ethical standards, corporate governance practices, and regulatory compliance. The business philosophy of the bank stands on five core values: Operational Excellence, Customer Focus, Product Leadership, People and Sustainability.

HDFC Bank offers several loan products and services including auto loans, two-wheeler loans, personal loans, loans against property, consumer durable loan, lifestyle loan and credit card loans. If you are looking to borrow a HDFC loan, here is all you need to know about the loan repayment requirements of HDFC bank.

Loan Repayment Options Available at HDFC Bank

HDFC allows borrowers to make online loan repayment through two different ways i.e. Online and Mobile App.

1. HDFC Internet Banking:Customers can repay loans by making EMI payments through online mode. They can visit the official website of HDFC Bank and enter relevant login credentials and then proceed to login. After successful login, one can select the appropriate loan account and make payment of loan EMI using an HDFC Bank account balance.

2. HDFC Mobile App: HDFC bank also has a mobile app feature for its customers. Customers can easily download the HDFC mobile app on their Android or iOS phones through Google Play Store or Apple Store respectively. After logging in to the app, go to the payment tab and then click on a personal loan. By following simple steps, one can make the loan EMI payment through the mobile app.

3. Other Payment Options: Customers are given multiple options for paying loan EMI. Here are some of the ways through which customers can proceed to pay EMI:

Paytm: For this, customers have to log in to their Paytm account and click on loan repayment. Now, choose HDFC Bank and then proceed to pay EMI.

Cheques: Post-dated cheques drawn on the same bank/any nationalised bank are also accepted.

NEFT/RTGS: This process is easy to follow while making loan EMI payment using a bank account other than HDFC account.

Billdesk: Customers can also make loan EMI payments using Billdesk. For this, they must enter Loan no. and Date of Birth as per bank records. Payment can further be made using any bank account in India.

Repayment of Personal Loans in HDFC Bank

Personal Loans offered by HDFC bank come at competitive interest rates of 10 to 15%. The loan tenure generally ranges from 1 to 5 years. One can avail a Personal Loan within as little time as 10 seconds if the bank has selected the applicant for a pre-approved customer. The bank also has the facility to give out a personal loan within 4 hours if the applicant is a non – banking customer.

A non–HDFC Bank customer will have to provide documents when applying for a Personal Loan with the bank. The bank gives out a loan amount of up to Rs. 40 Lakhs, depending on the applicant’s income level and ability to repay the funds on time. When it comes to loan repayment, one can easily do so through instalments or EMIs.

Repayment of Home Loans in HDFC Bank

HDFC Bank offers several home loan repayment options to loan borrowers. The most preferred mode of repayment of a home loan is through equated monthly instalments or EMIs. EMI is a fixed amount that one pays to the lender every month till the entire home loan has been repaid. EMIs are due on a fixed date every month. A borrower must ensure to pay EMIs throughout the loan tenure and promptly.

Each home loan EMI comprises interest payable on the total loan and part principal repayment. While the EMI is generally a fixed sum through the loan tenure, during the initial loan tenure, the interest component within the EMI is higher (and the principal component is lower). As one gets closer to completing the home loan repayment, the principal repayment component of EMI tends to be higher whereas the interest component becomes lower.

Repayment of Gold Loans in HDFC Bank

Gold Loans are commonly borrowed across India. This is because a Gold Loan is a great way of easily arranging funds for financing various needs. Whether it is a medical emergency, a business deal or other financial requirement, one can get cash instantly through gold loans. Since a gold loan requires one to pledge a certain amount of assets, these come with lower interest rates and have flexible repayment options. In a gold loan, one doesn’t need to go with only Equated Monthly Instalments or EMI option for repaying the Gold Loan. HDFC bank offers multiple modes of gold loan repayment to its borrowers.

Gold Loan borrowers of HDFC bank can select a Gold Loan repayment option which enables them to pay off the interest component of the loan in monthly instalments. This can be as per the EMI schedule offered by the lender. The entire principal amount can then be paid off as a lump sum amount, at the end of the loan tenure. This way, one can reduce the interest burden on the loan and pay off the loan as per their financial ability.

Benefits and Drawbacks of Loan Prepayment

Life can be challenging at times and one may often need a little extra money to deal with various life situations. A loan from HDFC bank comes in handy during such times. However, an individual’s financial situation may turn around faster than anticipated and the borrower can easily clear off as much debt as possible in advance of the loan tenure completion.

Paying off a loan faster than anticipated, can significantly reduce the total interest burden, and one spends far less time in servicing the debt. However, a loan pre-payment can have its own set of drawbacks, a penalty being one of them. We have often heard of penalties for delayed loan repayment; however, banks may even penalise for early repayment.

What is a prepayment penalty?

A prepayment penalty is a fee that has to be borne by the borrower for paying a loan off earlier than specified in the loan agreement. If the terms and conditions of the loan agreement have a prepayment clause, the bank may penalise the borrower for clearing the debt earlier than anticipated.

When a borrower repays a loan early, the lender does not get to earn the expected interest (for lenders, the interest is their profit). Hence there is a penalty clause in most loan agreements. The amount may vary and not all banks practise this penalty policy. Always read the fine print of a loan document to learn about the penalty clause and related terms and conditions.

How to calculate prepayment cost?

If a loan does not have a prepayment fee mentioned by the lending institution, the borrower can benefit by repaying the loan sooner than stated tenure. Even if there is a prepayment clause, one can save some money. This depends on the penalty fees stated and the total amount of loan that is still pending to be repaid.

As a first step, one needs to determine how much savings can be generated by repaying the loan early. One can calculate this by adding the total interest applicable for remaining loan tenure and adding the ongoing fees to it. This is the total value one can save by prepaying the loan before completion of tenure.

Reduce the prepayment and related fees from the final amount. Look closely at the fees levied – whether they come at a flat rate or as a percentage. The remainder value is the total savings that can be generated by paying the loan early. A negative figure means more cost and fewer savings.

Advantages and Disadvantages of Loan Prepayment

If a borrower is confident about paying off a loan early, it makes the most sense to look for a lending institution which does not have a prepayment penalty or clause. Sometimes, even if a penalty is levied by the bank, prepayment can end up being a good or bad decision as per the type of loan and outlook of the borrower.

FAQs

1. If an EMI moratorium offered on HDFC bank loans under Covid-19 - regulatory announcement?

RBI in its announcement related to Covid-19 relief package, allowed all Banks and Indian Financial Institutions to offer its customers the option to avail EMI moratorium of up to 3 months. Customers can choose to delay their EMI payments or loan repayment scheduled from Mar 1st, 2020 to May 31st, 2020. This was further extended by an additional three months, thus making the moratorium period of a total of 6 months.

2. What is the meaning of EMI in loans?

EMI means ‘Equated Monthly Instalment’ which is the amount to be paid to the bank on a specific date each month till a loan is fully repaid. The EMI comprises the principal and interest components which are designed in a way that in the initial years of the loan tenure, the interest component is larger than the principal component. Towards the end of the loan tenure, the principal component is much larger as compared to interest.

3. How can I repay a home loan I borrowed from HDFC bank?

For the convenience of loan borrowers, HDFC bank offers different modes for loan repayment, especially for a home loan. One can issue standing instructions to the banker to pay the instalments through ECS (Electronic Clearing System). There is also the option of direct deduction of monthly instalments by the employer or post-dated cheques can be furnished to the bank.

4. What are the personal loan repayment options offered by HDFC Bank?

For a personal loan repayment to HDFC Bank, one can opt for equal monthly instalments (EMIs). Loan repayment can also be done through post-dated cheques. The bank allows customers to make loan repayment through Electronic Clearing System (ECS) or by giving standing instruction to debit HDFC bank account for the payable amount.

5. If I have borrowed an HDFC bank loan, when is the principal amount to be repaid?

Repayment of the principal amount of a loan begins from the month after full loan disbursement. Pending final disbursement, one has to pay interest on the portion of the loan disbursed. This interest is also called pre-EMI interest.

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