5 Questions to Ask Before Prepayment

1. 5 Questions to Ask Before Prepayment

2. It is an obvious human nature that they need freedom. Either it can be a political freedom, social freedom or an economic freedom. One of the most important ways to liberate yourself economically is making yourself debt free. Being debt free brings mental relaxation and enables you to become more productive. By satisfying your balance ahead of schedule, you can save money on interest and free up cash for other expenses.

3. Am I eligible to prepay? Your eligibility of prepayment depends on your lock-in period. To generate a certain minimum return on the monies loaned, to cover the lender's marketing and loan administration expenses, this is a period when loan full-payoff is not allowed without penalties. During this period you are not allowed to do a prepay. Different Financial Institutes have a different lock-in period.  The minimum lock-in period in an online loan is 12 months.

4. How much would I need to prepay? The best way to know the amount which you can prepay at a certain point of time is - using a prepay calculator. An online prepayment calculator shows your outstanding balance on the principal amount, interest charged on the principal and the tenure. So by having an analysis on the EMI calculator, you can find out how much to be paid. But here is something you are to keep on notice that if your bank or NBFC is imposing any prepayment penalty charge on you.

5. How am I going to prepay? Your prepayment towards an online loan can come with many ways. The best way amongst all is to save your extra money and when there is an ample amount in your savings account you can plan a prepay and make yourself debt free. If you feel that your savings are not going to be enough for prepayment you can take up one more conventional personal loan to prepay the existing loan. While taking one more loan, one must check the interest rate very carefully.

6. Prepayment or part payment, which is better for me? The prepayment in full should be done relatively early days in the tenure of the loan if a customer tends to save a lot on the interest. A personal loan generally has a lock-in of about one year after which the entire outstanding amount can be prepaid.  The basic intention behind full prepayment is to save the money which we are paying to the lender in terms of interest. Whereas, part prepayment means when you pay a lump sum amount of money but not the entire amount outstanding of your principal amount. By having a part prepayment a part of the principal amount is paid.

7. Do I need to prepay? No, it is not mandatory that borrower has to pay a  prepayment or part payment of their loans online. It is completely a personal decision whether you want it or not. It is strongly advisable to have check closely if your monthly budget is disturbed by the prepayment. One should plan for a prepay only if he/she has some extra money in hand. You can have small savings without hampering your budget in a regular basis.

8. Conclusion By having a prepayment you will be stress-free and can save much money. Prepayments are always beneficial for the borrower if the lender imposes no pre-payment charges. So have your doubts cleared on prepayment and enjoy the economic freedom.