Anyone can need a loan at any time. Well, in today’s time it is very easy to take a loan. But before taking a loan, you should take a good detail about the terms and conditions of the loan. Another important thing is whether you want to take a home loan or a personal loan, you should try to repay it ahead of time.
There are many benefits of paying off the loan early. Here we will tell you how to repay your loan ahead of time and its benefits.
These are three big advantages
First let’s talk about repaying the loan ahead of time.
- The first and foremost benefit of these is reduced interest burden. The sooner you repay the loan, the less interest you will have to pay. The longer the loan lasts, the higher the interest is to be paid.
- The second advantage is being loan free. You can meet other financial goals by getting out of debt.
- The third important advantage is that if you repay a loan ahead of time, then your CIBIL will be good. This will make it easier for you to get the loan again in future.
How the loan is repaid
We will tell you three ways to repay the loan here. Here we will take an example of a personal loan and explain in which 3 ways you can repay the loan. These three modes include regular closure (normal repayment), pre-closure or foreclosure (premature payment) and part payment. Now know the meaning of these methods.
Regular closure or normal payment
Regular closure means regular loan repayment by you. It is a simple process that you have taken a loan from the bank and your EMI is made in terms of the loan tenure.
Then you keep paying EMI on monthly basis. On completion of the loan, definitely contact the bank to close it. Because after paying the loan in full, you must take NOC from the bank. This is a proof that you have repaid the loan.
Pre-closure or foreclosure
This is the only way through which you can repay the loan ahead of time. It happens that if you want to repay the loan ahead of time, then contact the bank.
The bank will charge you some fee for premature settlement of the loan. But this will greatly reduce the interest burden on you. The bank can charge you up to 2-4% of the outstanding amount as a charge.
For example you took a loan of Rs 5 lakh and paid off Rs 3 lakh. 2 lakh left. You got Rs 2 lakh from somewhere and you want to finish the loan from them.
So the bank will take 2-4 percent extra amount from you including Rs 2 lakh. In this way your loan will be repaid ahead of time.
Part-payment or Part-payment
This is another way through which you can repay the loan ahead of time. What happens in this is that you increase your EMI by not repaying the remaining loan at once.
When the EMI increases, the loan tenure will automatically reduce. For this, you have to request in the bank, on whose approval your new EMI starts from the bank.