A personal loan is usually taken to cover emergency expenses, make purchases, or repay consolidate debts. It is repaid in easy monthly instalments over the loan tenure. Borrowers also have the option to prepay the outstanding balance, subject to applicable prepayment charges and conditions.
The prepayment of a personal loan becomes difficult when someone has accepted the funds without reading the complete terms and conditions of the loan agreement. The borrower needs to read the loan agreement carefully and ask the lender about their prepayment rules.
Some lenders grant borrowers the ability to pay off their loans early without charging any prepayment penalty. However, many others require borrowers to pay specific charges or penalties when they pay off their loans in advance.
The lender will present the loan information to you with a contract which requires your signature when you accept the loan. All information about your loan amount, as well as the borrowing term, is mentioned in the loan agreement. You need to examine the loan agreement terms about prepayment because they reveal the exact costs which you will need to pay should you decide to prepay your loan.
Contact your lender to find out their rules about prepayment. Request information about all fees and penalties which may be levied during early loan repayment as part of the repayment process.
Calculate the entire amount owed, including interest and fees, up until the prepayment date. Lenders might give a precise amount or explain how to figure it out.
The payment method for early loan settlement depends on the lender’s guidelines, which might require you to make one large payment in a lump sum.
You have to ask your lender for proof that the loan has been completely paid off after you finish making all the payments.
