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HDFC Bank Personal Loan Preclosure Charges
HDFC Bank offers convenient options for borrowers to pre-close or pre-pay their personal loans, allowing them to clear their outstanding loan amount before the original due date. Read on to know the specifics of HDFC Bank's personal loan pre-closure, the associated charges, advantages, and potential disadvantages.
HDFC Personal Loan Preclosure Charges
Typically, borrowers are permitted to prepay their personal loans after a minimum of 12 months from the loan procurement date. The preclosure charges depend on the outstanding principal and duration of the loan.
The pre-payment charges are:
Between 13 – 24 months | 4% of the outstanding principal amount |
Between 25 to 36 months | 5% of the outstanding principal amount |
more than 36 months | 2% of the outstanding principal amount |
Part Payment Charges for HDFC Bank Personal Loan Preclosure
Partial prepayment charges are permissible up to 25% of the outstanding principal amount, limited to once in a financial year and twice during the loan period. After the initial EMI has been paid, partial prepayment is permitted.
The partial payment charges are:
Post 01 EMI and up to 24 EMI repayment | 4% of the part payment amount |
Post 24 EMI and up to 36 EMI repayment | 3% of the part payment amount |
Post 36 EMI repayment | 2% of the part payment amount |
Advantages of Pre-Closing HDFC Bank Personal Loan
- Increased EMI Affordability: Prepaying a personal loan can improve your eligibility for new loans by reducing your overall EMI-to-income ratio. This allows you to manage your finances better and explore additional credit options.
- Savings on Interest: Pre-closing your personal loan can lead to substantial savings on interest costs. By repaying the loan amount before the original tenure, you can significantly lower the total interest paid over the life of the loan.
- Enhanced Credit Mix: Personal loans are considered unsecured loans, and reducing their proportion in your credit mix can positively impact your credit score. A healthier balance between secured and unsecured loans increases your chances of obtaining future credit.
Steps for HDFC Personal Loan Pre-Closure
The process of pre-closing an HDFC Bank personal loan involves the following steps:
- Contact HDFC Bank: Get in touch with an HDFC Bank representative to express your intention to pre-pay your personal loan.
- Payment: Make the pre-payment by providing a cheque or a demand draft at any HDFC Bank branch. Cash payments above Rs.49,000 are not accepted; alternative methods such as pay orders, account payee cheques, or demand drafts are required.
Considerations When Pre-Closing Personal Loan
- Pre-Payment Penalty: Analyse the pre-payment penalty imposed by the lender. Compare this penalty with the interest savings resulting from pre-paying the loan to ensure that the decision is financially viable.
- Liquidity Impact: Be cautious about using your existing investments to pre-pay the loan, as this could impact your emergency fund. If doing so jeopardizes your financial security, it might be wiser to avoid pre-closure.
Conclusion
HDFC Bank's personal loan pre-closure option can provide borrowers with the flexibility to settle their loans ahead of schedule, bringing potential advantages like improved eligibility for new loans, interest savings, and enhanced credit mix. However, the decision to pre-close should be made after careful consideration of associated charges, impact on liquidity, and long-term financial goals. By understanding the terms and assessing your financial situation, you can make an informed choice regarding pre-closing your HDFC Bank personal loan.
FAQs on HDFC Personal Loan Preclosure:
1. Can I pre-close my HDFC personal loan at any time?
No, HDFC Bank allows pre-closure only after a minimum of 12 months from the loan procurement date, along with the payment of 12 EMIs and applicable charges.
2. How are pre-closure charges calculated for HDFC personal loans?
The pre-closure charges are calculated based on the outstanding principal amount and the duration of the loan. The charges vary for different time periods.
What is the advantage of pre-closing a personal loan? Pre-closing a personal loan can lead to increased EMI affordability, savings on interest costs, and an improved credit mix, thereby enhancing your creditworthiness.
3. Are there any disadvantages to pre-closing a personal loan?
Pre-closing a personal loan can impact liquidity and may result in pre-payment penalties. It's important to weigh these factors against the benefits before making a decision.
4. Can I pre-close my personal loan partially or in parts?
Partial pre-closure of HDFC personal loans is allowed up to 25% of the principal outstanding. However, full pre-closure is recommended for the complete benefits.
5. What documents are required for the pre-closure process?
The pre-closure process typically involves contacting an HDFC Bank representative and making the payment through a cheque or demand draft. Proof of identity, address, age, bank statements, and recent salary slips may be required.
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