By Admin 
Personal Loan Prepayment: Often people take personal loans to meet their needs and later when they get extra money, they also plan to repay it before time. If you are also planning to make prepayment of personal loan, then instead of taking the decision without thinking, it can be beneficial for you to know the important things related to it.
Prepayment can reduce your interest burden in some cases. But this is not the right option in every situation. Many banks also charge additional charges for premature loan repayment. Due to which the total savings are affected. Let us know about it…
More benefits in the initial phase of loan
The real benefit of prepayment of personal loan comes when you make it at the beginning of the loan. If it has been only a few months or about a year since you took the loan, then by making prepayment at that time you can save a good amount of interest. This is because in the initial period, a large part of your EMI goes in the form of interest.
At the same time, if your loan is about to end and only a few months or a year is left, then there is very little benefit in making prepayment. By that time you have paid most of the interest. At this time, by repaying the loan early, there is no significant savings or it is very little.
It is important to understand the mathematics of prepayment charge.
All information related to the loan should be obtained in advance. Generally, banks charge about 2 to 5 percent of the outstanding amount on prepayment. Due to which the total expenditure may increase. Therefore, it is important to see whether the interest savings you are getting is more than this charge or not.
Many times it happens that the prepayment fee becomes very high, in such a situation, repaying the loan in a hurry can become a deal of loss instead of profit. If your loan is about to expire and you are easily able to pay the EMI, then it is advisable to avoid making prepayment.
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