Flexible and easily accessible, personal loans are the perfect financial aid in the hour of need. Nowadays, the process to apply for personal loan has become very straightforward. You can either apply for personal loan from the comfort of your home by looking for a personal loan online or walk into any financial institution nearest to you.
Applying for a personal loan is quite easy. Most people use the entire loan tenure to repay the loan. But, this can get financially tiring as you have to pay a specific interest on the personal loan every month. In such scenarios, you can choose to foreclose the personal loan by paying the outstanding amount all at once or by making partial payments towards the outstanding principal amount.
What Is Personal Loan Prepayment?
When a borrower avails of a personal loan, they repay it in EMIs that are best decided with the help of a personal loan calculator. But, if you have surplus cash, then you can consider closing the loan by repaying the outstanding principal in a lump sum.
Benefits of Personal Loan Prepayment
If you choose to prepay the personal loan in full, you will save a lot of money on the interest. Higher personal loan interest rates can often turn into a substantial financial burden, leading to increased chances of default. If the prepayment on the personal loan is made immediately after the lock-in period, then you can save a lot in terms of payable interest.
However, this benefit gradually reduces as the loan tenure reduces because the EMIs are structured in a way that the interest payments are higher during the initial tenure of your loan. Even then, it is quite beneficial to prepay to avoid paying interest. By prepaying, not only will you save money, but can also use the saved money that can be reinvested or used for other needs.
Before deciding on personal loan prepayment, always remember to do a cost-benefit analysis. Calculate how much the personal loan is costing you and how much can you save by making a prepayment. It also helps to use a personal loan EMI calculator available online. Enter all the loan details such as the- loan amount, tenure, interest rate, processing fee (if any), foreclosure charges (if any), etc. to calculate your EMI accurately. Always make sure that you know about your lender’s terms and conditions and fees, especially foreclosure charges before you opt for the full repayment.
What Is Personal Loan Partial Payment?
Partial prepayment means that you can opt to pay the principal amount partly. Partial payment towards a personal loan can be made when you have a lump sum of money lying idle, but the amount is not equivalent to the entire outstanding loan amount.
Benefits of Personal Loan Partial Payment
Paying a hefty amount as part of the interest till the end of your loan tenure can cause a financial strain, more so if you have chosen a long tenure. If you make partial payments towards the outstanding amount, then your unpaid principal loan amount will reduce. Doing this will, in turn, decrease your interest burden and save you a substantial amount of money.
However, you should keep in mind that partial payments only work when you pay a lump sum amount. Making a small partial payment for a personal loan will not create much of a difference, especially if there are prepayment charges involved. Also, when it comes to personal loans, many financial institutions don’t allow partial payments, hence, always be aware of the rules and conditions before you apply for a personal loan with a financial lender.
If you want to cover immediate financial requirements, and are looking for an instant personal loan, head to Tata Capital. At Tata Capital, we offer personal loan for self-employed as well as salaried-individuals at attractive personal loan interest rates. Before applying for the loan, check your personal loan eligibility and use our personal loan calculator to betterplan your finances. The personal loan eligibility criteria are vital, as they determine whether you can apply for the loan or not. We allow both partial payment and prepayment of personal loans after the lock-in period. To know more about our prepayment and partial payment policy, log on to our website today!