Personal Loan Prepayment Charges & Norms of Top Lenders

Last Updated : June 27, 2020, 12:07 p.m.

Nobody wants to be under the debt burden for long. And the same applies to personal loan borrowers too. As the personal loan interest rate finds itself in the double-digit zone, you may want to get rid of it as soon as possible. The interest rate can go up to 20%-25%, chucking out interest from your pocket. Although the maximum repayment period is capped to 5 years in a personal loan , taking it at a greater rate will only make you pay more interest to the lender. So, you should look to prepay the loan fully or in parts by using the growth in your income over time. As a result, your interest liability will come down. But there are some charges and norms associated with the same. Let’s find out all here!

Apply Personal Loan @ 10.75%* Rate

So, What are the Charges and Norms?

If your personal loan is running at any of the following top lenders, you should know the applicable charges and norms.

Note – The prepayment charges will also add a 18% Goods and Services Tax (GST)

Shall You Go for a Balance Transfer to Prepay Your Existing Personal Loan?

The full prepayment of the existing personal loan can be done either from your own sources or via a balance transfer. You would know personal loan balance transfer is a process by which you can transfer the existing loan to another lender at a lower rate. This reduces the interest obligations of borrowers. But this is ideal when the existing personal loan tenure is quite a few years away from being over and the rate offered by the new lender is at least 3%-4% lower than the existing one. An example below will help you understand the concept better.

Example – You are servicing a 5-year personal loan of say 8 lakh at a 15% interest rate. In that case, you must have been paying an EMI of INR 19,032. The loan has run for 2 years and a new lender has come with a balance transfer offer of 11%. If you agree, how will it reflect on your repayment? Check this out in the table below.

The lender will ask for a fee for the balance transfer. Now that fee could be a flat amount or a certain percentage of the outstanding loan balance. Make sure the savings remain substantial despite the fee levied on the transfer.