Unveiling the Benefits of Loan Foreclosure in India
In a world where loans from banks or other institutions are sought after for various needs, individuals often find themselves obligated to make monthly payments towards their EMIs (Equated Monthly Installments). These loans come in various forms, such as personal loans, car loans, home loans, among others.
Loan Foreclosure: What’s the Process?
If one wishes to terminate a loan before its designated tenure, a specific procedure, known as Loan Foreclosure, comes into play. The process involves:
- Visit the Lending Institution: Head to the respective bank or institution where the loan was acquired.
- Application Submission: Obtain and complete the Loan Foreclosure application form accurately.
- Submission with Necessary Documents: Alongside the application, attach copies of your PAN card, loan account number, and address proof.
- Await Approval: Upon acceptance, the remaining loan amount details will be provided by the bank.
- Clearing Dues: Make the pending amount payment via NEFT/RTGS, subsequently discontinuing the EMI cycle.
Understanding the Charges Involved
Regarding charges, if the loan is on a floating interest rate, no additional charges are imposed upon early closure as per RBI regulations. However, in the case of fixed interest rates, the lending institution might levy certain foreclosure fees. These fees vary across different banks and are often outlined in the loan agreement.
Benefits of Loan Foreclosure
- Financial Liberation: The most apparent advantage is liberation from the burden of monthly EMIs.
- Improved Credit Score: Closing loans ahead of schedule positively impacts one’s credit score, facilitating easier access to future loans.
While contemplating Loan Foreclosure, it’s essential to note:
- Loan Tenure Variances: Personal and car loans typically have shorter durations compared to home loans, which might extend up to 15-20 years, resulting in prolonged EMI commitments.
- Loan Type Implications: Fixed and floating interest rates can influence the imposition of foreclosure charges.
So should you foreclose or prepay your loan?
Loan Foreclosure emerges as a viable option for individuals seeking financial flexibility by breaking free from lengthy EMIs. Understanding the process, associated charges, and benefits becomes pivotal in making informed decisions regarding loan closures.