What are the key benefits of prepayment and partial payment of Personal Loan
Personal Loans are one of the most in-demand financial products in the country. They are popular because of the flexibility and accessibility they offer during the hour of need. Personal Loans have the fastest disbursement period and do not require any collateral. To apply for a Personal Loan, one has to be 21 years of age, self-employed or salaried and have a regular source of income. This is standard criteria, however, this rule may not be the same everywhere and vary across organisations. Apart from the above points, to avail of a Personal Loan, one has to have a good credit score. A credit score above 700 is ideal for a Personal Loan application to get approved.
How does one check the eligibility for a Personal Loan?
These days checking the eligibility for a Personal Loan is relatively simple. You can go online and use any eligibility tool available. Every eligibility tool asks for basic details like name, date of birth, income, city, etc. After entering all the details, the tool generates your eligibility status and if you’re eligible, it shows an approximate loan amount.
What can a Personal Loan be used for?
Almost every category of a loan has a defined role or a purpose. For example, a Home Loan is taken to purchase property and Auto Loan to buy a vehicle. But that is not the case for Personal Loans. They can be used for anything. They can be used for medical treatment, education, consolidating debt, wedding and even a vacation. The borrower will never be questioned about the purpose of the loan.
What is the repayment period for a Personal Loan?
The repayment period for a Personal Loan ranges between 12 – 60 months. Some people use the entire tenure to repay the loan while some prefer prepayment, and some even make partial prepayments.
What is Personal Loan prepayment?
Generally, once a loan is availed; it is repaid in Equated Monthly Instalments (EMIs) till the end. However, when people have surplus cash at their disposal, they consider closing the loan by paying off the outstanding principal.
Depending on the lender’s terms and conditions, a prepayment penalty could be charged, but that fee is nominal. Personal Loan prepayment benefits people by allowing them to save money that would have been spent on the interest rate. People use this opportunity to reinvest the money saved or use it for personal expenses.
A Personal Loan can also be closed partially, and that is known as partial payment of Personal Loan. Partial prepayment is paying the principal partly. When the principal loan amount reduces, the rate of interest also automatically reduces. This gives borrowers the chance to save money. Even if you pay a small amount, it helps reduce both EMI and interest rate significantly, and these are the primary benefits of part payments of Personal Loan.
Many major banks like ICICI Bank have a nominal fee for prepayment and in some cases, even waiver the fee if you share a good relationship with the bank. If you have a good credit history and surplus cash, prepaying a loan can only help you build a good credit score.
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