A home loan is very much dependent on the interest rate applicable on it and as due to the continuous surge in the lending rates it has become one of the most prominent problems that the home loan borrowers are facing. In the present situation home loan prepayment can be of great use.
Under the prepayment facility a borrower can pay an additional sum of amount to bring the amount of monthly installments to be paid under control and by reducing the principal amount remaining. A borrower can make partial of full prepayments but a borrower needs to know that the lender can charge penalty if the amount of prepayment exceeds a certain fraction.
The good thing is that the according to the guidelines of The Reserve Bank of India, if a person id prepaying form his own sources, then a lender can not charge any thing extra from the borrower not even if he prepays the entire loan amount.
Generally when a borrower refinances his loan to another lender under such a condition his present lender can charge prepayment penalty. Prepayment penalty is implied on the loan amount due and can vary from lender to lender; generally it is high for the private sector lenders as compared to the public sector ones.
While making prepayments a borrower needs to be aware of a few things, the first thing is that he must try to negotiate as much as possible on the prepayments charges as generally they are not fixed and the other thing is that a borrower must calculate the sum of amount that he would be saving by making prepayment, that would include all the expenses associated with the loan as only then the calculation can yield some results that would help a borrower to opt for the most appropriate option.
If a person has borrower a few loans and if he wants to prepay the loan then he must go for the loans that is more expensive or that attracts high rate of interest.
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