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Federal Bank gives its customers the option of pre-closing their personal loans before the end of the loan tenure by paying a nominal penalty of up to 3% of the loan balance that is outstanding. The lender offers an easy and hassle-free loan pre-closure procedure. That said, it is important to be well aware of the terms and conditions of your loan before you pre-close it.
The fee that you will need to pay when pre-closing your loan will vary based on the type of loan you had borrowed. Listed below is Federal Bank’s schedule of charges that may be applicable when pre-closing your loan:
|Type of Loan||Penalty|
|Floating rate loans to individuals||Nil|
|Fixed rate loans to non-individuals (overdraft)||3% of the outstanding loan balance or the DP|
Although you may have surplus funds available to pre-close your loan, ensure that you check the cost of the loan and compare it to the returns that you may be able to earn if you were to invest the surplus fund. If you find that investing the surplus funds will yield higher returns, it is best to continue repaying your EMI and invest the sum that you have in hand.
Pre-closing your personal loan is the right thing to do if paying EMIs on a monthly basis is becoming a hassle and a financial burden to you, provided that you have the required funds in hand. Keep in mind that even if you are not able to prepay the entire outstanding balance all at once to pre-close your loan, you can make part-payments towards your loan. This will help reduce the outstanding loan balance, which will, in turn, reduce your payable EMIs. Regardless of what option you choose, ensure that you are well aware of any clauses that the lender may have specified in your loan agreement.
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