A personal loan does not come attached with utility restrictions and can be used as immediate help for an urgent need. The current rate of interest varies between 11 % to 35 %, which depends on several factors like your income, credit score, age, other debts, etc.
Since it is an unsecured loan, you might have to pay a high rate of interest. If you are thinking of pre-closure, you must pay off the loan with the highest rate of interest first. Methods of preclosing a Personal Loan - part-payment or pre-payment? A personal loan can be availed when facing a cash crunch, and once finances look sorted, you would want to get rid of the debt as soon as possible. There are two ways how to prepay your loan:
You can use a calculator to assess the real profit by a prepayment. If the profit is marginal, then it is not recommended to make the prepayment. Consider factors like:
Procedure for the Pre-closure of Your Loan A loan closure can be a regular closure or a pre-closure. In both cases, you must follow these crucial things while closing a loan
How to pre-close the loan? Pre-closure or prepayment means repaying your entire loan before the tenure ends. There could be a penalty for pre-closing the loan, but it can lead to a reduction of interest rate and debt burden. Following is the procedure involved in pre-closing your loan: Step 1 - You need to visit your bank or visit the credit line webpage or app from where you have taken the personal loan. Step 2 – You would need to submit the necessary documents mentioning the loan account number, clearance of your last EMI, and a cheque or online payment for prepaying your entire loan. Step 3 – If there is any charge or penalty charged by the lender, you would need to pay that too, along with the prepayment. Step 4 – Collect the acknowledgement letter for future references. Step 5 – After following the appropriate procedure, you will get the loan agreement after the closure of the loan. Documents required for Personal Loan Pre-closure
Documents to collect after Pre-closure
When you must invest and not prepay:
When you must prepay and not invest:
Conclusion Pre-closure of personal loans is a relatively simple process, especially if taken through a credit line. The correct norms and procedures should not be neglected at any cost to avoid any problems related to your credit. It has numerous benefits which you can enjoy after the closure, provided the appropriate factors are considered and followed.
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