Prepay or Early Partial Pay Your Personal Loan: Benefits

Early partial payment of personal loans means that when you have surplus funds in your bank account, that amount goes to making early repayment of part of your personal loan. Full prepayment means fully paying back the personal loan that you have taken, before the due date. Early partial payment of your personal loan has the impact of lowering the EMI that you have to pay for the remaining term of your loan. It also has the impact of saving on the interest that you have to pay on the loan.

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What Is Pre & Partial Payment of Personal Loan?

First, it’s well-established that personal loan repayments typically take place in the form of monthly installments or EMIs for a stipulated period. Now, you can skip the tension of missing your EMI dates or the hassle altogether when you have excess or surplus funds at hand. In that case, you can either partially or fully prepay the remaining personal loan balance.

Benefits of Prepayment of Personal Loan

The advantages of prepaying and making partial payments on personal loans are as follows:

• It aids in lowering the total amount of interest owed on the loan.
• Thanks to it, you can pay off your debt early.
• It enables you to avoid paying interest fees as soon as possible.

Benefits of Making Partial Payment of Personal Loan

Paying a sizable sum in interest until the conclusion of your loan’s term can be financially taxing, especially if you choose a long tenor for the loan. Your remaining primary loan balance will decrease when you make partial payments toward it.

As a result, doing this will reduce your interest costs and result in significant financial savings. You must bear in mind, though, that partial payments only function when you make one lump sum payment.

It won’t make much difference to make a minor partial prepayment on a personal loan, particularly if prepayment fees are on the table. In addition, numerous financial organizations refuse to accept partial payments for personal loans.

Thus, thoroughly read the terms and conditions before submitting your personal loan application to the lender.

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Summary

• Part payments might reduce the balance due, reducing the interest charged on your personal loan.
• Your credit score will increase if you pay everything upfront.
• Part-prepayments are only effective with lump-sum payments.
• Pre-closures of personal loans won’t negatively impact your credit score.
• Pre-closing a loan can help you avoid paying interest.
• In most cases, a bank’s lock-in period prevents you from closing your loan account during that time.

You can relieve yourself of debt strain by closing your personal loan account. Determine whether you will genuinely gain from paying off your loan early. Completing a prepayment won’t benefit you in any way if the prepayment fees offset the interest savings.

Frequently Asked Questions

Does personal loan prepayment boost your credit score?

Prepayment or paying the loan on schedule will have a positive impact on your credit score.

Can my EMI amount decrease if I make a partial payment toward my loan?

After making partial payments, you can contact the relevant bank to ask them to shorten the EMI’s repayment period or monthly payment frequency.

Is it possible to prepay a personal loan at any point during its term?

Prepayments on personal loans are permitted only when 12 EMI payments have been made.