Many people include loan against property prepayment as a part of their financial planning due to its numerous benefits. However, it is associated with several challenges that they should be aware of to make the best decision. Since a loan against property is a long-term commitment, it is essential to make all the decisions carefully. Here is a complete guide on the pre-payment of LAP.
Benefits of part pre-payment of loan against property
Following are some notable benefits that borrowers can get when applying for a loan against property:
- Saving substantially on interest: Pre-payment of loans help borrowers to save a lot of money on interest. They can use this money for various other purposes, and gain profit from them.
- Zero requirements of extra charges: Reputed financial institutions do not charge extra for the pre-payment of credits. Hence, borrowers can save on these costs as well when pre-paying their loans.
- Ensures timely loan repayment: Upon pre-paying a substantial credit amount, people need to pay low EMIs to repay the remaining amount. This ensures they can pay off the entire money on time.
However, there are several drawbacks of prepaying LAP as well that borrowers must be aware of when part prepaying their loan.
Drawbacks of part prepayment of loan against property
Following are some of the prominent disadvantages of pre-paying LAP:
- Availability of options from lenders: Many lenders do not allow pre-payment of credit. Hence, borrowers should check the availability of pre-approved offers when applying for credit.
- Additional funds arrangement burden: Oftentimes, it becomes challenging for borrowers to arrange for additional funds to pre-pay the loan. In such scenarios, they should reconsider their pre-payment decision.
- Associated terms and conditions: There are several terms associated with repayment where borrowers need to pay a certain percentage of credit amounts. Accordingly, they should pay the pre-payment amount.
Also, when planning for pre-paying LAP, borrowers should also know about the times when they should refrain from taking this step.
Times when borrowers should avoid part pre-payment
Following are the scenarios when borrowers should avoid pre-paying their loan against property:
- Towards the end of repayment tenor: Towards the end of credit repayment tenor, a borrower would have already paid a huge portion of the credit amount. Hence, pre-paying the credit at that time appears meaningless.
- High pre-payment charges present: Before pre-paying credit, a borrower must assess the total pre-payment costs. If it is more than their rate of interest, they may not proceed with this.
- Have other investment options: If a borrower finds that investment of the extra money in various assets is more profitable, they can go for those, instead of pre-paying the borrowed amount.
There are online loans against property EMI calculators that provide borrowers with the LAP amortisation schedule. Accordingly, they can take the decision of LAP pre-payment.
Once a borrower is aware of the essential information regarding their loan against property part pre-payment, they can follow some steps to apply for it.
Steps to part pre-pay loan against property
One can follow the steps below to prepay their loan against property:
Step 1: Navigate to the official website of the lender.
Step 2: Log in to the personal account using the proper credentials.
Step 3: Click on the “Payments” button and select the “Online Payment” option.
Step 5: After that click on the “Proceed” tab and enter the prepayment amount”
Step 6: Verify all the details and click on the “Pay Now” button.
Step 7: Once done, the ‘Billdesk Payment Gateway’ appears on the screen.
Step 8: Finally, enter your card details and complete the payment.
There are several reputed financial institutions that provide pre-approved offers to existing borrowers. These offers are usually available on products like loans against property, home loans and more. These offers hasten the loan approval for borrowers. One can check their pre-approved offer by logging in to the official website of financial institutions and entering their personal details.
There are several pros and cons associated with a loan against property prepayment. Hence, borrowers planning for it must assess if pre-payment offers sufficient benefits in terms of returns. Otherwise, they can park this money in assets and generate passive income from them.