Want To Close Personal Loan Pre-maturely? Know Effect On Your Credit Score

In today’s time, the process of taking personal loan is very easy. For this, you can apply even sitting at home, or you can also apply for a personal loan by filling some minor documents by visiting the bank. You have to pay some interest every month on the loan, which can be a bit financially troublesome at times. In such a situation, the person thinks of getting the loan foreclosure by making an outstanding payment. Let us know how much prepayment or partial payment of loan is right for your credit score.

Regular closure 

In this, the customer pays his EMI every month for a fixed period of time. After the EMI is completed, the bank should be approached for loan closure as soon as the last installment is done. For this, if you want, you can also talk to the customer care.

Pre-closure 

When a customer wants to make full payment of the loan before the end of loan tenure, it is called pre-closure. All banks have different lock-in periods, before which the loan can be closed. Some banks charge pre-closure while some banks do not charge for it.

What can be the effect of pre-closure 

Many banks offer you the facility of prepayment of personal loans. If you prepay a loan, you can save a lot of time and money. However, some banks also levy a penalty on pre-closure which can range from 2% to 5%. If you want to calculate how much profit or loss you are in prepayment then you can use online EMI calculator. Banks have been asked by the Reserve Bank of India not to charge a penalty for prepayment of personal loans. But it is applicable for floating rate loans only. If you want to make prepayment in future, then definitely read the rules regarding foreclosure of the bank. In such a situation, if your credit score is good then you can choose this option. Full prepayment can boost your credit score.