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Is it possible to pay off a personal loan before tenure?

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Repayment of a personal may become challenging at times especially when you have hastily taken the funds without going through the details. When you take a personal loan, it is important to carefully review the loan agreement or contact the lender to understand their policies regarding prepayment.

Some lenders may allow prepayment without any penalties or fees, while others may impose certain charges or penalties for early repayment. You can consider repayment of your personal loan when you get additional funds, or you have surplus money. Before paying off your personal loans, you must know all pros and cons and go ahead when it is financially beneficial.

Adhil Shetty, CEO, Bankbazaar.com, says, “Paying off your personal loan early can save you a lot of money on interest. If you have the extra money, it’s a great way to reduce your debt and improve your financial health.”

Also Read: How to manage your finances & avoid falling into a debt trap

If you are considering paying off your personal loan before the tenure, here are a few steps to follow:

Review Loan Agreement

Whenever you take a loan, the lender would explain you details and ask you to sign an agreement. This agreement contains details of the loan and terms and conditions at which you are borrowing the money.

Carefully go through the loan agreement to understand the terms and conditions related to prepayment, including any penalties or fees associated with early repayment.

Contact the Lender

Reach out to your lender and inquire about their prepayment policies. Ask about any fees or penalties involved and seek clarification on the process of making an early repayment.

“Speak to your bank if you have funds to pay the loan before the tenure ends. Check whether they charge any penalty for pre-closure. Never hesitate to clear your doubts. The pre-closure option reduces your debt burden and, therefore, is a good option for your financial health,” adds Shetty.

Calculate the Outstanding Amount

Determine the total outstanding amount you need to repay, including any interest or fees up to the date of prepayment. Lenders may provide a specific figure or provide instructions on how to calculate it.

Arrange for Repayment

Depending on your lender’s procedures, you may need to provide a lump sum payment to settle the loan early. The lender will provide you with instructions on how to make the payment, including the account details or payment methods.

Get Confirmation

Once the repayment is made, request confirmation from the lender that the loan has been fully paid off. Retain this confirmation for future reference and as proof of the loan closure. You must also ask for an NOC so that there is no confusion related to the payment later. Receive all necessary documents from the lender confirming the fully repayment of the loan.

Remember, it’s essential to communicate directly with your lender to understand the specific terms and conditions of your personal loan agreement and to ensure a smooth prepayment process. It is possible to pay off a personal loan before the designated tenure.

Paying off a loan early is often referred to as prepaying or prepaying the principal amount. However, the specific terms and conditions regarding prepayment vary depending on the lender and the loan agreement you have signed. It is also important to understand that you must not use your emergency funds or break your fixed deposits till you are sure of some benefits of repayment of your personal loan. Factor in returns you are getting on your existing investments and how much you are paying in interest for your personal loan. This calculation will help you make an informed decision.



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