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Acquiring a personal loan<\/a> is no longer a tedious task. With the digital process, you can have your loan approved within a few minutes. No more long waiting hours or strict application process.<\/p>\n\n\n\n Although having a huge sum reflected in your bank account is a pleasant sight, monthly repayments are far from fun. Want to break free of this burden? Consider an early loan repayment.<\/p>\n\n\n\n Keep reading this article as we explore the concept of prepaying personal loans, its benefits, and how to go about it.<\/p>\n\n\n\n Personal loan prepayment means repaying part or all of your outstanding loan amount before the scheduled tenure ends. Instead of following the original EMI plan to its last installment, you use surplus funds such as a bonus, a windfall gain, or accumulated savings to reduce or clear the balance early. Since interest on a personal loan is charged on the outstanding principal, every rupee prepaid cuts the interest you would have paid over the remaining months.<\/p>\n\n\n\n Here is a simple example. Suppose you take a \u20b95 lakh personal loan for 5 years. Two years into the tenure, you receive a bonus and use it to clear the entire outstanding balance. The loan closes 3 years ahead of schedule, and the interest that would have accrued over those 3 years stays in your pocket. Even a part prepayment of, say, \u20b91 lakh works the same way on a smaller scale: the outstanding principal drops immediately, and all future interest is calculated on the reduced balance.<\/p>\n\n\n\n Also, read \u2013 What is Part-Payment, Pre-Payment, Pre-Closure of Loan?<\/a><\/p>\n\n\n\n Considering prepaying your outstanding loans? You are in for the following benefits:<\/p>\n\n\n\n When interest is accumulated over an extended period, it can compound to a significant amount. Prepaying can curtail this accumulation. By paying off the loan amount, partially or completely, you will save on extra interest levied on you over the years.<\/p>\n\n\n\n Paying off loans before the end of the loan tenure is a sign of financial responsibility. Needless to say, financial institutions respect proactive repayments. Hence, early loan repayment can guarantee a boost in your credit profile.<\/p>\n\n\n\n Loans are liabilities that take away a good chunk of your monthly salary. Cutting them off through an early repayment is a liberating feeling. With no liabilities dragging you down, you will have less financial stress and much-needed peace of mind.<\/p>\n\n\n\n No monthly repayments translate to more flexibility in managing finances. You can use this surplus fund now to make value investments and buy assets that appreciate over time.<\/p>\n\n\n\n Early loan repayment comes in two forms: complete prepayment or partial prepayment. While both terms imply early repayment, they operate differently.<\/p>\n\n\n\n Complete prepayment denotes a clean slate \u2013 the loan amount is settled<\/a> in one go. In contrast, partial prepayment is a calculated approach, paying a significant portion but not the entirety.<\/p>\n\n\n\n Partial prepayment is a good option when you don\u2019t have the funds to close the loan completely but still want some ease from the monthly payments. You can use personal loan prepayment calculators to better understand your loan\u2019s state if you repay it partially.<\/p>\n\n\n\n <\/p>\n\n\n\nWhat Is a Personal Loan Prepayment?<\/strong><\/h2>\n\n\n\n
Benefits of Personal Loan Prepayment<\/strong><\/h2>\n\n\n\n
Save Interest on Your Loan<\/strong><\/h3>\n\n\n\n
Improves Your Credit Score<\/strong><\/h3>\n\n\n\n
Become Debt-Free Faster<\/strong><\/h3>\n\n\n\n
Financial Flexibility & Better Cash Flow<\/strong><\/h3>\n\n\n\n
Full vs Part Prepayment of Personal Loan: Key Differences<\/strong><\/h3>\n\n\n\n