Why Prepayment Charges matter?
When you take a personal loan, you agree to repay the amount within a certain period of time, like 3 years or 5 years. The EMI you pay towards repayment of the loan also includes personal loan interest rates. Financiers like Bajaj Finserv offer Personal Loans with attractive terms and special benefits like instant approval, prepayment facility, and online account access.
Sometimes, you might have a sudden influx of funds like an increase in income, or a good payoff on an investment. In this case, you might want to consider paying off the loan earlier, to save on the interest payment. When you consider foreclosing the loan, you also have to factor in any prepayment charges that the bank or finance company might charge you.
Why Do Some Companies Charge Prepayment Fees?
Finance companies earn money through the interest they charge on loans. If you foreclose the loan, they will lose the interest they would have otherwise received. To compensate for this loss, some banks and financial institutions charge a prepayment penalty. Personal loan prepayment charges in India differ depending on the lending company but mostly hover around 4-5% on the remaining amount you have yet to pay.
Why Should You Consider Foreclosing a Loan?
When you borrow money, the interest charged is higher than the interest you will be paid on deposit accounts. For instance, your savings account might earn you around 4 to 7% interest. But the interest you have to pay on a personal loan can begin at around 15% and easily go beyond that. So it makes sense for you to pay off the loan quickly to save on the interest amount.
Figure out the interest payment you will have saved if you choose to foreclose. Then calculate the prepayment charges you have to pay if you foreclose. If prepaying the loan saves you a significant amount, choose to foreclose the loan despite the prepayment charges. You can also use the part prepayment calculator.
Personal Loan Offer – You Can Find Loans Without Prepayment Charges
When you are looking for a good personal loan, check out various offers. There are so many varied offers on personal loans in India now. There are many offers of personal loans without prepayment charges too. However, before you decide, take into consideration other factors like interest rates. At times, a lower interest rate might offset the prepayment penalty.
Check out the Personal Loan fees & interest rate being offered at Bajaj Finserv. You can get a personal loan for up to INR 25 lakhs with the option of instant approval.
If possible, always give preference to paying off a loan before the due date. This will result in saving you a good bit of the interest you would have had to pay otherwise. Even with foreclosure charges, if you foreclose well before the full tenure, you will find that it is beneficial. However, foreclosing a loan when it is very near the due date might not make any difference. When you apply for a personal loan, choose one that has has low-interest rates and is more convenient for you. Bajaj Finserv offers a online Personal Loan that gives you online account access and the option to apply online.