Flexible and easily accessible, personal loans are the perfect financial aid in the hour of need. Nowadays, the process to apply for a personal loan has become very straightforward. You can either apply for a personal loan online from the comfort of your home or walk into any nearby financial institution.
Sure, applying for a personal loan is pretty easy. But the repayment part is a whole different story. Most people use the entire loan tenure to repay the loan. However, this can get exhausting 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 at once or by making partial payment of personal loan.
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, you can consider closing the loan by repaying the outstanding principal in a lump sum.
Benefits of Personal Loan Prepayment
First off, 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, you can save a lot in terms of payable interest.
But here’s the catch! The EMIs are structured so that the interest payments are higher during the initial part of the loan tenure. However, it is still quite beneficial to prepay to avoid paying interest.
Additional Read: Personal Loan Prepayment in India: Pros and Cons
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 you can save by making a prepayment. It also helps to use a personal loan EMI calculator available online. Enter all the details such as loan amount, tenure, interest rate, processing fee (if any), personal loan foreclosure charges (if any), etc. to calculate your EMI accurately. Always be aware of your lender’s terms and conditions, 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 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. Hence, doing this will 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. Thus, be mindful of the rules and conditions before you apply for a personal loan with a lender.
Additional Read: Does Prepayment of Personal Loan Affect Your Credit Score?
If you are looking for instant personal loan, head to Tata Capital’s website. We offer personal loans for self-employed as well as salaried individuals at attractive personal loan interest rates. Before applying for the loan, check your eligibility and use our personal loan pre-payment calculator to plan your finances. We allow both partial payment and prepayment of personal loans after the lock-in period. To know more about these policies, log on to our website today!