A "low interest" loan shouldn't mean you have very little interest in paying it back!
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    Home Loan Prepayment

    Holding a debt is an unwanted and distressing thought for many individuals. Any loan taken is a form of debt which needs to be repaid with the addition of interest that is applicable on that loan. Considering this, it is only natural that anyone who holds a home loan, would want to pay it off as soon as their finances have improved. Loan prepayment is defined as when a customer has paid off their loan completely or partially before the scheduled due date as specified in the policy wording. However, prepayment on a home loan, though considered by many loan takers, may not always be the best financial decision that one can make. There are multiple factors which one must consider before deciding to pre-close their home loan.

    Who can make Home Loan Prepayment?

    While a prepayment on your home loan can be beneficial for you, it is a loss for your home loan provider. For home loans, banks borrow funds based on a commitment for a long time period. When a customer pre-closes their home loan, those funds received by the bank must be re-assigned through credit channels, which is an additional cost for the bank to bear. This is the reason why loan borrowers are discouraged from prepaying their loan by the bank. One of the most common method in which banks discourage prepayment on home loans is be refusing to accept the payment unless the borrower visits the bank branch in person. However, though most people may not be aware of the fact that even if they may not be physically present at the bank branch to make the prepayment, they can do so by authorizing a representative to make the payment of their behalf. For this purpose, the representative must carry a letter issued by the original loan borrower authorizing them to make the payment on their (the loan borrower’s) behalf.

    Some Do’s & Don’ts of Home Loan Prepayment:

    Given below are a few things to remember when you are making your home loan prepayment:

    1. Do remember to carry a Government issued photo ID proof like your PAN card, Passport or Driving Licence, etc.
    2. Do remember to carry your cheque book as you will be making not only for the home loan prepayment principal amount but also for the simple interest applicable on your home loan which needs to be paid alongside.
    3. Don’t forget to mention your details like your name, contact number and home loan account number behind all the cheques which you issue to the bank for prepayment.
    4. You must remember to take the acknowledgement of the pre-payment that you’re making. The acknowledgement must mention details like the post-prepayment principal outstanding amount, remaining of the home loan duration or the new EMI. Ensure that the acknowledgement is duly stamped and signed by the authorized bank representative.
    5. In the event that your EMI payment is done via cheques and your EMI has been revised and reduced following the prepayment, then you will be required to issue fresh cheques with the revised EMI amount. Having done that, do not forget collect the previously issued unused cheques which you had issued with the higher EMI amount. This is to prevent misuse of your funds.
    6. Carry along your bank statement, of the account from which you have been making your home loan payments, for the past 6 months. This may be required as some banks might request you to provide the source of the funds for your home loan pre-payment.

    Updating Pre-payment Details in the CIBIL Database:

    One of the most important parts of the prepayment process is updating your prepayment details in the CIBIL database. Your CIBIL score is essentially a proof of your credit health and is heavily dependent on your outstanding home loan balance. Therefore, making a prepayment on your home loan can greatly decrease your outstanding balance and improve your credit score.

    While banks may be quick to update your CIBIL score hen you’ve take the loan, they may not be as efficient to update the score when you have pre-paid your loan. You must ask your bank to immediately update your current home loan account balance in the CIBIL database with the revised principal balance amount. It can normally take from 45 to 60 days for the details to be updated, counting from the date when the prepayment has been made. Do remember to go through your CIBIL report after the mentioned duration required for updating the score on the database and check if the same has been done.

    Is It Wise To Pre-pay Your Home Loan Considering The Current Interest Rate Regime?

    Following the Reserve Bank of India’s tightened policy stance, the present interest rate cycle is likely to either incline or remain steady. But is it wise to foreclose your home loans early with rates expected to go up again during the fiscal year? With most home loans linked to the Marginal Cost of funds based Lending Rate (MCLR), existing borrowers can continue paying the same rate until the reset clause is specified by the bank depending on the type of MCLR the loan is linked to. While new borrowers will have to pay a higher interest on the home loans, existing borrowers might have to brace for a higher rate if the bank hasn’t specified the rest clause in the previous months. Another aspect to consider before foreclosing your home loan are the tax benefits one can avail on the repayment of principal and interest amount annually. As per the Income Tax Act, you can avail benefits that allow deductions up to Rs.1,5 lakh under Section 80C on the principal part and deductions up to Rs.2 lakh under Section 24(b) for the interest payment on the housing loan.

    Home Loan Prepayment Reviews

    • DHFL Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have a home loan with DHFL INSTITUTION . I got option of preclosere and it is very nominal . The process to get the loan is fine. The rate of interest is fine even processing fee nominal . The loan was provide on time and the documentation was collected on time too. I received the loan amount as expected.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 18, 2019
    • ICICI Bank Home Loan
      "Useful for private employee people"
      0.5 4.0/5 "Great!"
      In 2006, I have taken my housing loan with ICICI Bank. During that time, they have assured me a lower interest rate hence i have chosen them. After 1 year, they have increase the interest rate which is higher than other bank hence i have done the pre-closure. Processing fee and interest rates were very high.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • Bank of Baroda Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      The experience i had with this loan has been quite good where the process was very simple and smooth. The loan amount which they had provided has been sufficient and the interest rate which they offered me was very less when compared with the market rate. The charges which they had made has been nominal as well.
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Jan 18, 2019
    • Indiabulls Home Loan
      "Good loan services"
      0.5 4.0/5 "Great!"
      In March 2018, I have applied the home loan with India bulls. My friend has recommended about the indiabulls loan. They have given me a interest rate of 8.35% and I'm happy with it. I have received the loan in 20 days. I have no idea about the processing fee. Total tenure period the loan is 20 years. I am making the EMI through ECS.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 18, 2019
    • Canara Bank Home Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It was quite a good experience with this home loan, the interest rate with them was a little high initially but it has been reduced afterwards. There has not been any hidden charges which they had made and the processing fee has been very nominal. Their customer support has been excellent in guiding in everything.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Good in Service"
      0.5 3.0/5 "Satisfactory"
      When i was looking for a home loan, I had applied with with SBI . When i had submitted the documents , my application was taken care and it was processed. There was no delay and processing was on time. Interest rates are reasonable compare to the market value.
      Was this review helpful? 1
      , secunderabad
      Reviewed on Jan 18, 2019
    • LIC Housing Home Loan
      "Interest rate should be flexible"
      0.5 4.0/5 "Great!"
      LIC housing is providing good interest for home loan, but when govt reversed the rate of interest, I got higher percentage and they have taken some processing fee from the disbursement. But they didn't give any insurance. Anyway LIC housing has balance transfer, part payment and foreclosure option.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Best financial service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan from State bank of India where i have transfered the loan from other bank . Where they are giving satisfying rate of interest . There is nominal charges for the processing fees for the documentation . Am pretty much satisfied with the rate of interest which they have provided.
      Was this review helpful? 2
      , pune
      Reviewed on Jan 18, 2019
    • Kotak Home Loan
      "Best financial service "
      0.5 5.0/5 "Blown Away!"
      I have taken Housing loan from the Kotak mahindra bank , They have given Fair rate of interest based on the market price . They did instant approval process as fast as they can do . . There is no nominal processing fees as every bank i used to charge which is minimal .Overall am satisfied with the financial service .
      Was this review helpful? 0
      , pune
      Reviewed on Jan 18, 2019
    • Axis Bank Home Loan
      "Right bank to fulfill your dream home"
      0.5 3.0/5 "Satisfactory"
      Last August i have purchased my home loan from Axis Bank. Since the rate of interest is less and I'm existing customer of Axis bank for last 11 years hence i have chosen them. Processing fee was nominal. I have applied the loan amount of Rs. 22 lakhs which is sanctioned bit delayed.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Very Good Service"
      0.5 4.5/5 "Excellent!"
      It was quite a good experience with them, where the loan amount which they had provided has been sufficient, the service charges where nominal. The interest rate with them has been less when compared to other banks. There has not been any charges additionally and the customer support of them has been helpful as well.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Good Financial service"
      0.5 4.5/5 "Excellent!"
      Rate of interest is bit low compared to other bank they have given best rate of interest am fully satisfied with it , They took time like 1 month for the processing and approval for the documentation as they do property evaluation . . They have charges some nominal fees for the housing loan approval Am pretty much satisfied with the customer service .
      Was this review helpful? 2
      , kochi
      Reviewed on Jan 18, 2019
    • Citibank Home Loan
      "Can do better"
      0.5 3.0/5 "Satisfactory"
      Ten years back I took home loan from Citi Bank at that time, the interest is higher and I done lots of documentation. CITI bank deal is not good, I done the foreclosure but I didn't pay any extra fee. They do have balance transfer, part and foreclosure options.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 18, 2019
    • Bajaj Finserv Home Loan
      "Bajaj Finance / Fineserv are CHEATERS"
      0.5 0.5/5 "Unacceptable"
      Bajaj Finserv and finance makes false promises and then cheat the customer. They should be punished for doing it. They are terribly horrible. Don't go for any products or loans from Bajaj, they will certainly cheat you in some way and won't care about you once they have collected their fees and start increasing interest. Customer feels helpless and frustrated.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 18, 2019
    • ICICI Bank Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using my home loan with ICICI bank,they have given me sufficient loan amount,and the rate of interest they have charged me up to 8.9% it is not fixed,it varies according to market rate, and they have not charged me processing fee as it is zero processing fee, and the loan is still running,overall service is good.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 17, 2019
    • IDBI Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been using my housing loan with IDBI bank, they have given me sufficient loan amount, and the rate of interest they have charged me up to 8.45% which was nominal for me, and the processing fee they have charged me was nominal, and still my loan is running,till now i had good experience.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 17, 2019
    • SBI Home Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I had taken my housing loan with State bank of India, the loan amount they have given me was sufficient but was below to my expectation ,was okay for me , and the rate of interest they have charged me was nominal,and the processing fee they have charged me was very nominal,there overall service was good, now my loan got closed.
      Was this review helpful? 2
      , chennai
      Reviewed on Jan 17, 2019
    • Bank of India Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have been using my housing loan with Bank of India, there service was good ,they have given me sufficient loan amount, and the rate of interest they have given me was up to 8.5% now,the rate of interest is not fixed it use to fluctuate according to market price, and the processing fee they have charged me was nominal,there mobile application and net bank is good, there application is user-friendly,but if i took loan from Hyderabad bank but i am in Bangalore branch then they will not help me out in this only on that bank they will be helping out if i had any issue or query.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 17, 2019
    • Bank Bazaar Home Loan
      "It was a good experince and very easy to reach them and talk"
      0.5 3.5/5 "Pretty good"
      I feel very good. Bank Bazaar approve my loan. I got a call from Bank Bazaar customer service. They will help me provide me loan. Customer service agent also very polite and well behaved. I think this Company provide very good service and they help people a lot. It was a good experience and very easy to reach them and talk them and also you can easily apply their staff is also very good.
      Was this review helpful? 2
      , delhi
      Reviewed on Jan 16, 2019
    • SBI Home Loan
      "Good Experience for Housing loan"
      0.5 4.0/5 "Great!"
      SBI is best for the home loan, they come down to 9% of interest its good compared to private sectors. The documentation verification is very easy and very secured as well. Even the bank gave me balance transfer, pre closure, part closure options.
      Was this review helpful? 5
      , mumbai
      Reviewed on Jan 14, 2019
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