Emergency money requirement can impact financials of anyone especially those who earn less. And unforeseen events such as medical emergency, job loss, etc. can affect person’s financial health badly. At such times borrowing money in the form of personal loan is the best alternative.
You can get personal loans from following common sources in India:
- Commercial banks
- Scheduled and un-scheduled co-operative banks
- Peer to peer lenders (P2PL)
- Local money lenders
Getting yourself out of recurring debt as early as possible is the key to financial success. Sooner you pay-off your dues, better would be your finances as you will save money on EMIs and the interest. And the saved money can then be used for any other purpose such as investing etc. Check out personal loan for low income earners.
However financial institutions do not think this way as they want borrower to continue repayment as long as possible. Because for them, pre-payment of loans or partial prepayment before the end term is loss making as they lose out on EMI. This is the reason banks keep loan tenures longer or charge higher EMI to earn more profit. And this hurts honest borrowers the most. Even though they have a timely loan repayment record, they still can’t close their loan account before the standard tenure ends.
Foreclosure charge is basically a certain percentage charged on the outstanding principal amount in addition to the applicable taxes. Part prepayment is charged in a similar way but the charge is lower than the foreclosure.
But not every bank charges fee for paying the entire loan amount before the actual end of its term. Enlisted in the below table are the lenders offering personal loan with no preclosure charges or offer partial waiver along with the interest rate charged by each. Many of these lenders do not levy prepayment charges when EMI is paid for a certain number of prefixed months/years.
|Name of Lender||Interest Rate||Loan Foreclosure Charges|
|Axis Bank||15.5% to 24%||No foreclosure and prepayment charge|
|Bank of Baroda||0.1475||Nil|
|Oriental Bank of Commerce||0.1375||Nil|
|Punjab National Bank||16% to 16.25%||Nil|
|State Bank of India||0.182||Nil|
|United Bank of India||0.1625||Nil|
|IDFC Bank||11.99% - 19.50%||Nil|
|State Bank of Mysore||0.1655||Nil|
|State Bank of Hyderabad||15.25%-15.75%||Nil|
|State Bank of Patiala||0.1195||Nil|
|State Bank of Travancore||0.1245||Nil|
|HSBC Bank||11.49% to 17.5%||4% - partial prepayment|
|YES Bank||0.14||Nil - partial prepayment|
|Allahabad Bank||12.10% – 14.60%||Partial Prepayment - 2.25% of Outstanding Balance|
|Bajaj Finserv||0.1199||Partial waiver - 2% on principal outstanding|
|HDFC Bank||15.5% to 22.25%||Partial Prepayment - 4% of Principal Outstanding|
|ICICI Bank||15.5% to 22.25%||Partial Prepayment - 5% pa of principal outstanding|
Some banks may allow you to pay a certain percentage of the loan amount in a financial year, thereby reducing the burden of the loan. And even this option is better compared to loans offered by banks with pre-closure charges.
Things to do after closing personal loan:
Loan account closure gives a good sigh of relief to the borrower. However things may become problematic in future, if you do not consider following factors:
- Get all important documents from the bank: Post loan closure, you should get back all the important documents submitted to the bank while taking the loan. Most importantly this includes acknowledgement letter given to you at the time of closure, etc.
- No objection/due certificate: Another important document is the NOC, a legal proof of closure. This states that the borrower has made all the repayments and no outstanding balance exists. Although it is the responsibility of the lender to send NOC to the borrower but you should too not forget to ask for the document.
- Pre-closure acknowledgement receipt: If you have closed your account by paying all the dues before the term ends, then get pre-closure acknowledgement receipt from the bank. Also try not to make pre-closure payment in cash. Cheque or demand draft can help as proof.
- Get report from CIBIL: After 45 days of closing the loan, get report from CIBIL and check whether the lender has updated the loan account record at CIBIL. If record is not updated, then ask your bank to do so at the earliest. Make this particular communication in writing, which will act as a proof.
- In addition to these, always keep a duplicate copy of each and every loan related documents handy including loan application, approval, closure letter, cheque payment copy, etc. And it’s best to keep soft copy of all these documents in your mailbox. Every document pertaining to the loan is critical and can help in the time of need.
The reason to do all these is because it will help you in case any disputes arise in the future when you apply for any type of credit or loan or if the bank get back to you stating dues are still remaining.