NEWS & ADVICE : HOME LOANS
Prepayment on loans: 'To do or not to do'
By Joseph Samson
Print    Email    RSS   
Based upon requirement of an individual loans can be classified into various categories. Loans can be differentiated into educational loans, home loans, vehicle loans, personal loans, gold loans et al, catering to the various needs of a person at different times while acquiring an asset. Interest rates on loans can also be differentiated into fixed interest rates or floating rates. But there is one thing which comes tagged along with all loans and that happens to be the ‘terms and conditions' or the contract of the loan. Terms and conditions safeguard the interests of both the borrower as well as the lender.

The terms and conditions of a loan cover all the aspects related to the loan, right from applying for the loan to margin amount, loan tenure, moratorium period, penalties, surcharges, documentation and many more. But one of the major clauses in most loans is the 'prepayment' clause. Prepayment means repayment of a loan by the borrower before the stipulated time in the loan contract.

 

What is Prepayment

Prepayment as the word suggests refers to repayment of a loan before its stipulated tenure. Prepayment of loan involves simply contributing an extra sum towards EMIs. This extra amount reduces the overall tenure of the loan, which also reduces the total interest paid and hence total amount paid to the bank is reduced.

Banks generally discourage borrowers to prepay fixed rate loans because in case of prepayment/foreclosure, the borrower ends up paying lesser to the lender than it would have been under the full tenure of the loan. The lender generally charges a penalty on early closure of such loans.


Page  | 123 |  
(Comments Posted : 1) Post Your Comments
1. Do you need a quick long or short term loan with a relatively low interest rate as low as 3%? We offer business loan, personal loan, home loan, auto loan,student loan, debt consolidation loan e.t.c. no matter your credit score.

* Personal Loans (Secure and Unsecured)
* Business Loans (Secure and Unsecured)
* Mortgage Loans (Secured and Unsecured)
* Consolidation Loan and many more.

Contact US for more information about loan offer and we will solve your financial problem. contact us via email: zionloanfirm.ltd@aol.com
Richelle Watford (Posted: Mar 25, 2015)
Show All Comments
COMPARE QUICKLY
 Select a product:
 

CALCULATE QUICKLY
 Select a product:
 

EDITORS' PICKS
Pre-pay your home loan
Carnival of Indian Personal Finance Blogs #1
Home Loans: How to reduce your floating rate
Hybrid loans – are they beneficial?
Six tips to choose your home loan lender


PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

NEWS THIS WEEK
Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive