Home renovation, arranging a wedding, medical emergency, debt consolidation, etc. are some expenses that can drain your savings account. Opting for a personal loan enables you to avoid the same. These loans can also help you improve your CIBIL score.
Financial institutions provide various features with personal loans making them advantageous for any use. Pre-payment and foreclosure are two such facilities that you can benefit from. Both options help in reducing the total cost of loan. check free CIBIL score online.
What is Pre-Payment?
Pre-payment or part-prepayment is a facility that enables you to pay a significant portion of your outstanding loan amount within the tenor.
Advantages of pre-payment
Pre-paying your personal loan can provide the following benefits:
Lower your EMIs while keeping the tenor the same.
Reduce your tenor and keep the EMIs the same.
Pre-payment may also improve your CIBIL score. However, you have to avail of this facility after a specific time to see a positive impact in your credit score. Usually, pre-paying your personal loan after paying 6 EMIs has a positive impact on your credit score.
Factors to consider before pre-paying your loan
Financial institutions charge a fee when you pre-pay an unsecured loan. Usually, the fee is a flat rate along with applicable taxes on the part-prepayment amount. Check such charges before applying for a loan.
What is Foreclosure?
Foreclosure is another facility that enables you to repay your personal loan in full before the tenor ends.
Advantages of Foreclosing Your Loan
Foreclosing helps you save on interest that you were liable to pay on the remaining EMIs. Some borrowers even consider it beneficial to pay off their debt as soon as possible to reduce their stress. Full pre-payment of your personal loan may also improve your CIBIL score.
Factors to Consider Before Foreclosing Your Loan
Financial institutions also charge a fee when you foreclose an unsecured loan. In this case, the fee is a flat rate along with applicable taxes on the outstanding principal.
Majority of NBFCs provide both pre-payment and foreclosure facilities with their personal loans. Do consider either of these facilities if you have a lump sum of funds available.