Advantages of Pre and Part- Payments of Personal Loan
Posted on Wednesday, September 7th, 2016 | By IndusInd Bank
Before diverting the extra cash or savings towards pre-payment or part-payment of your personal loan, you shall always consider its impact. Whether the decision of not serving the entire loan tenure would be beneficial or not shall always be your primary concern. Pre-paying your loan can be beneficial but such benefit depends on the sum that you are willing to shell out. Further, you need to be sure that the amount you would be parting with does not adversely affect your personal and professional financial strategy, including emergencies.
The main advantages of pre-payment or part-payment of a personal loan are discussed below:
Reduction of EMI and Loan Tenure:
By making part payment of your loan amount you will be able to reduce your prospective EMI and loan tenure. Moreover, by making more than one part payment, you can bring down your EMIs and loan tenure considerably.
It should be noted that while deciding the part payment amount, the savings percentage on your EMI should be on the higher side. For instance, an amount that provides you anything less 15% as savings on every EMI is not a good deal. As far as deriving maximum benefits is concerned, the reduction in EMIs should be in proportion to the reduction in tenure.
No pre-payment charges:
In case the interest rate of your personal loan is on floating basis, the bank cannot charge you with any foreclosure or pre-payment charges as per the RBI circular. Further, in the current competitive scenario, many banks do not charge any fees for pre-payment.
Pre-payment or part-payment facility of the loan is instrumental in the successful payment of the loan amount. These successful repayments of loans reflect in your credit report and enhance your future credit prospects. Banks and financial institutions rest assured that you, as an individual, are capable of handling credit responsibilities. A good credit rating paves the path for better loan offers and rates.
Next time when you are in a dilemma about pre-paying your personal loan, consider the above benefits.