Personal loans have become a common financing option in an emergency. These are collateral-free and have no restrictions in terms of usage. Although there is freedom, many people want to get rid of this financial responsibility as soon as possible. Loan prepayment is a great option to let off your financial responsibility. Prepayments could help save interest and lower EMI obligations. Here, we have covered everything you need to know about personal loan prepayment.
What is Personal Loan Prepayment?
Personal loan prepayment involves settling either the entire remaining balance or a portion of it before the scheduled due date, as outlined in the loan agreement. Such prepayment attracts charges from the bank, commonly referred to as the foreclosure charge on a personal loan. These charges are calculated based on the outstanding loan amount at the time of prepayment.
LoanTap charges 5% of the principal outstanding plus applicable taxes if paid before 6 months of loan disbursal.
Benefits of Personal Loan Prepayment
By opting for personal loan prepayment, you can speed up the process of becoming debt-free, relieving yourself of financial burdens sooner than expected.
Reduced interest outflow
Prepaying your personal loan results in a lowered outstanding balance, leading to potential savings on overall interest payments, which can significantly benefit your financial health in the long run.
Lower debts through partial prepayments
Making partial prepayments allows you to reduce the principal amount owed, thereby minimising the total debt burden and providing greater financial flexibility.
Improved credit score
By responsibly managing your personal loan through prepayment, you demonstrate positive credit behaviour to lenders, which can enhance your credit score over time, opening doors to better financial opportunities.
How to prepay personal loan
- Visit the LoanTap website.
- Fill out the form for prepayment of a personal loan.
- Pay the foreclosure fees.
- Your personal loan will close automatically once the applicable funds are received by the lender.
Understanding the process of personal loan prepayment can prove to be a valuable asset in your journey to financial freedom. By proactively making extra payments towards your loan, you not only reduce the principal amount but also potentially save on interest expenses, ultimately shortening the loan tenure. With careful planning and responsible financial management, prepaying your personal loan can be a strategic move to alleviate debt burdens and secure a brighter financial future. LoanTap can help you manage your finances and provide you with the right loan. Empower yourself with the knowledge gained from this guide and take charge of your financial well-being today.