BANKING AFFAIRS

Detailed explanation-1: -Most lenders charge a prepayment penalty of up to 5% of the outstanding principal amount of personal loan. Many lenders also restrict personal loan borrowers from making part-prepayments and/or foreclosure until the repayment of a predetermined number of EMIs.

Detailed explanation-2: -As the name suggests, a prepayment penalty is a monetary burden you have to bear when you pay your loan off earlier than specified in the agreement. If the terms and conditions of your loan agreement contain a prepayment clause, you will be penalised if you clear your debt early.

Detailed explanation-3: -Borrowers may be allowed to foreclose or prepay their loan 6 months after the date it has been disbursed, without any prepayment penalty. A charge of 2.5% + GST will be levied on any prepayment amount that is over 25% of the principal due. Part prepayment can only be done once in a year.

Detailed explanation-4: -Usually, the prepayment penalty on a personal loan starts after a certain lock-in period of 6 months or 1 year. Moreover, if the part-prepayment is more than 25% of the total outstanding balance, lenders may levy a fee of 2.5% or more plus GST. However, the charges depend on a lender and the loan principal.

Detailed explanation-5: -Most banks allow you to pre-close a personal loan by paying the outstanding amount, any time after six installments. However, pre-payment penalty is charged on doing so.