Have you taken a home loan to realize your dream of possessing a house but the insecurity of not owning it legally has been bothering you? Then here is an option of loan prepayment that will help you to rid of the loan before the tenure. It is also a nice alternative at a time when the interest rates are on a rising spree.

Loan Pre-payment

Prepayment means a privilege in a mortgage or loan permitting the borrower to make payments in advance of their due date. However the borrower needs to evaluate the consequences of a home loan pre-payment before opting for it. Here are few guidelines that would help you.

First and foremost you need to check the route available to you for making the home loan pre-payment. One can start the prepayment via part repayment where you pay off a certain amount to bring down the level of installments or reduce the number of equated monthly installments (EMIs). However there is a penalty that is charged for pre-paying the loan. Few banks allow a prepayment at zero fees for a certain period but a penalty is levied if one chooses to prepay his loan after this period. So make sure that the part prepayments are made within this period.

Further if you plan to pay a lump-sum amount and prepay the loan at once, the penalty would be high. However if you make partial pre-payment then this charge may be zero. But the definition of partial pre-payment may vary from bank to bank. For instance it can be something where enough pre-payment can be made to ensure that you still need to pay a few more EMIs to completely clear off the loan. This would help you to save on pre-payment penalty along with high interest costs on a significant portion of the loan.