Pros and Cons of Personal Loan Prepayment in India

 

Personal loan prepayment is a good way to resolve your loan within the tenure. It will help you get away with a loan easily so that you are free of the debt burden. Prepayment is easy and makes your borrowing process simple. However, every coin has two sides, and you need to check out the pros and cons of personal loan apply and prepayment.

Advantages of prepayment of personal loan

●     Debt burden: When you prepay your personal loan before the tenure of the loan, you get off with the loan burden. A loan is a burden. Even if your EMI is low, it is a fixed obligation that you cannot avoid. You need to make sure that you choose the right prepayment scheme and get off with your loan so that you can spend on other things as well.

●     No rate of interest: When you pay your instant personal loan online before your tenure ends, you can save a lot on paying the rate of interest. The tenure that you prepay saves the rate of interest on those months. It is very vital to remember that if paying an interest every month is what is pinching you, you can get it over.

●     Borrow in an emergency: When you prepay and get off with the loan, you are now eligible to go for a new loan if you need one. During an emergency, you can take a personal loan anytime you want. There will not be any debt to income ratio criteria coming up.

Read Also: 5 reasons to opt for a Personal Loan in medical emergencies

Disadvantages of prepayment

●     High prepayment charges: You prepay your loan because you want to save on the rate of interest. However, when you prepay, you end up paying a huge amount of money as Prepayment charges. The loan provider will charge you a high prepayment charge to cover up the loss of missed rate of interest as you are closing your loan early. So whatever you save by not paying your rate of interest, you pay for the charges.

●     Surplus amount: It is not a good idea to use any savings or investment or any sort of surplus amount in paying your loan. You can calculate the amount using a personal loan calculator. Prepayment is not a good idea as you can use your savings or any source of surplus amount for anything that adds value.

Finishing up

When you start your personal loan apply for an instant personal loan online make sure you use a personal loan calculator. This will help you compare and choose the right cost of the loan.