Home loan prepayment is an excellent facility offered by various NBFCs and financial lenders to home loan borrowers. Under this facility, the borrowers can make either part or full payment of their loan amount before the end of the tenor chosen by them.
Loan prepayment helps the borrower in reducing the principal outstanding amount as well as the interest payable over the entire loan tenor. One can even calculate the prepayable home loan amount using the home loan prepayment calculator. However, before opting for the prepayment of a housing loan, one must completely know about the prepayment process.
Procedure for Home Loan Prepayment with Home Loan Prepayment Calculator
If the borrower wants to repay the debt earlier, then prepaying a home loan can be one of the most effective ways to do so. Follow the step-by-step procedure given below for home loan prepayment using home loan prepayment calculator. The borrowers can use a home loan prepayment calculator to calculate the savings that he/she can gain through part prepayment of housing loans.
Step 1: Communicate with the lender
Since the borrower is paying off loans earlier than was planned to be paid, one needs to inform the lender beforehand regarding the prepayment of home loan.
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Step 2: Fill out the prepayment form
As soon as the borrower informs the financial institution regarding the home loan prepayment, the institution provides them with a prepayment form. The applicants need to fill this form carefully by providing all the information correctly.
Step 3: Submit the cheque and the documents
Along with the filled prepayment form, the borrowers also need to submit a cheque for the required prepayment amount. Apart from this, he/she also needs to submit the 3 months bank statement as proof that the borrower has sufficient funds in his/her account.
Note: Don’t forget to collect the unused cheque from the lender to avoid misusing it.
Step 4: Pay the penalty (if any)
If the borrower is prepaying the loan that he/she has taken on a fixed interest rate, then he/she needs to pay some amount to the lender as a penalty, as per the RBI guidelines. This is because the financial lender will lose some interest amount against the loan, and this will be a loss for them.
But the lenders cannot charge any penalty fees for prepaying a loan that is sanctioned on floating interest rates. However, there are some lenders that charge a certain sum as a fee for foreclosing a home loan.
Step 5: Foreclosing the home loan
After clearing the first EMI, one can prepay any amount, but this should be equal to the sum of at least three EMIs. Also, there is no restriction as such for the maximum amount that one can prepay as a part of their repayment of the loan.
One can even calculate the amount they can save and the tenor that can be reduced using an online home loan prepayment calculator.
Foreclosing a loan is indeed one of the best ways to reduce the loan tenor or EMI. The borrower can opt for prepayment depending upon his/her preference and requirements. So, by following these arrays of steps, one can simply prepay one’s home loan without any difficulty.
Many financial institutions and NBFCs provide pre-approved offers on a host of financial products like loan against property and others. Borrowers can check their pre-approved offers from their lenders by providing some simple details like their names and contact numbers. These offers help in streamlining the loan application.
Thus, prepaying a home loan is a good option when it comes to saving money on interest, but if done in an unplanned way, it might hurt one’s finances as well. T One should also be aware of the dos and don’ts of loan prepayment.