Jan 10, 2018

Pre-payment/Pre-closure Penalty on Secured Loans.

Stay Alert – Series 7

We borrow loan and repay principal along with interest on contracted terms and conditions for a particular tenure.
When the situation arises where we opt to pay of the entire loan before the scheduled tenure, the term pre-payment penalty knocks our doors which the Lender will impose / enforce on us.
There are 2 different scenarios which are considered when we approach Lender for Pre-payment/pre-closure of our loans.
The Lender may waive the penalty when we tend to sell the mortgaged property for which the loan was borrowed.
- But if the entire loan is being repaid before the tenure on account of retaining the property with us, then they impose a penalty on repayment before tenure.
How much penalty a Lender charges you on Pre-payment / Pre-closure?
The rate of charges may differ with all Lenders.The Lenders may consider below points while finalizing the pre-payment / pre-closure charges :
-Refers Sanction / Disbursement to check which terms and conditions were mentioned at the time of borrowing loan.
-There are various Lenders which levy fixed rate on all premature closure .
-The repayment of loan so far, whether any default in EMI’s payments or not.
-Rate of Interest on which the loan was availed.
Do we know that BCSBI (BANKING CODES AND STANDARD BOARD OF India www.bcsbi.org.in) is an independent and autonomous institution to monitor and ensure that the Banking Codes and Standards adopted by the banks are adhered to in true spirit while delivering their Services.
Lastly always ensure that whether we have explored all the alternatives before arriving at decision / signing off that we have to pay the Pre-payment / Pre-closure penalty.

Stay Alert and Stay Safe.

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