What Is Loan Prepayment?

You can clear off your personal loan fully or partly before the actual tenure of the loan ends. If you see a lump sum accumulating in your account, you can use it to prepay your loan. 

What Are The Benefits of Loan Prepayment?

  • When you have taken a loan, it is quite tiring to pay an interest amount every year. So, it will be a good idea to prepay your loan
  • Full prepayment of your current loan is considered positive and has a positive impact on your CIBIL™ score . 
  • It will help you to become debt-free. A debt-free life is good, since it helps you to be stress-free, leaves you with more money in your account, helps you to get financial independence earlier, and mitigates the risk of financial crisis. 

What Is Personal  Part Prepayment

  • Part prepayments also bring down the interest rates on loans. 
  • Post making your prepayment, you can maintain the same loan tenure and reduce your EMIS or pay the same EMIs and shorten your loan duration. 
  • But, part prepayments are effective only when you pay a lump sum. 
  • Also, if you have prepayment charges, paying partly will have a negligible impact on your EMIs. 
  • Most importantly, some banks do not allow part prepayments on personal loans, so find out the prepayment rules and conditions before you apply for a personal loan. 

Can The Personal Loan Be Prepaid Without Any Prepayment Charges?

Yes, top lenders allow you to prepay without prepayment charges. You can apply for a personal loan prepayment after the lock-in period expires.

Some of the top banks with nil prepayment charges are: 

Banks 

Interest rates for personal loans 

Whether Prepayment Facility Is Allowed 

PNB 

8.45%

Allowed 

Corporation Bank 

8.90%

Allowed 

Andhra Bank

8.90% 

Allowed 

Union Bank of India 

9.30%

Allowed 

Federal Bank

10.49%

Allowed 

Tata Capital 

10.49% 

Allowed after 6 months 

Muthoot 

14.00% 

Not Allowed 

Syndicate Bank

12.40% 

Allowed 

Indian Bank

8.50%

Allowed 

Karur Vysya Bank

8.70%

Not Allowed 

Some banks allow prepayment with nil charges if you satisfy specific conditions. Some of them are as follows:

  • SBI: If you close an old personal loan from SBI to get a new personal loan, then you will not be charged for prepaying your old personal loan
  • ICICI Bank: ICICI bank does not offer a part prepayment facility, but it offers a waiver on the prepayment if you have paid your EMIS on time for 12 months. 
  • Yes Bank: Yes Bank does not charge any prepayment fees after 48 months of the personal loan duration if only 25% of the principal amount is outstanding. 
  • Axis Bank: Axis bank does not levy any foreclosure charges on prepayment. But, if you prepay during the lock-in period of 6 months, you will be levied a foreclosure fee of 2%.