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

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  • 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.

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    Home Loan Prepayment Reviews

    • Canara Bank Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan through Canara Bank directly .The rate of interest was 8 % it was very less according to my concern and not sure about the processing fee .This loan was sanctioned on time without any drawbacks .I have taken 17 lakhs for the tenure of 10 lakhs .I am totally satisfied with the service so far .
      Was this review helpful? 2
      , chennai
      Reviewed on Dec 12, 2019
    • HDFC Limited
      HDFC Limited Home Loan
      "Easy to apply loan"
      0.5 3.5/5 "Pretty good"
      I have applied a Home loan through online. My application canceled by HDFC Limited because my net salary is Rs. 25k they said its not sufficient for the loan approval. Customer service was not so good, not so bad, it is average. I think, the rate of interest was 8-10%.
      Was this review helpful? 0
      , jaipur
      Reviewed on Dec 11, 2019
    • DHFL Home Loan
      "Quick approval loan"
      0.5 3.0/5 "Satisfactory"
      I have taken a housing loan from DHFL and the loan amount of Rs. 10,50,000 for the rate of interest of 9.8%. I am paying the EMI amount of Rs. 8500 for the tenure period of 15 years since its plot cum construction loan. Bank itself approved a loan within 3 days.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Dec 11, 2019
    • LIC Housing Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through LIC Housing Finance .The rate of interest and the processing fee was quite nominal .This loan was sanctioned on exact time frame without any delay.This loan is still active and i have submitted the required documents as well .If EMI is paid on delay basis there will be extra charges.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 10, 2019
    • SBI Home Loan
      "Easy loan"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan from SBI and the loan amount was Rs. 30 lakh. The rate of interest was 8.15% and i am paying EMI of Rs. 25k. Customer service was good. I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 2
      , pune
      Reviewed on Dec 09, 2019
    • Muthoot Homefin Home Loan
      "Good Finance"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan in MUTHOOT HOMEFIN LIMITED on one year before. The amount was offered of 6L which was sufficient as per my requirement. The tenure period of 7 years. My friend has suggested this finance to apply a loan. The process was smooth and sanctioned the loan within 15-20 days. Interest is nominal. Pre closure is applicable and part payment can be done of above 50K. It is nominal to pay for EMI.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 09, 2019
    • ICICI Bank Home Loan
      "Instant loan approval"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with ICICI Bank. They have taken my documentation and also completed the verification as well. The loan amount was Rs. 8.75 lakhs and the rate of interest was 8.6% i am happy with the interest.I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 1
      , jaipur
      Reviewed on Dec 09, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC LTD .The loan amount was sanctioned on time without any delay .The agent shared all the details about the loan process ,I have submitted the required documents on time ,This loan is still active and there was difficulties faced so far .The loan tenure is for 5 years ,i have completed 1 year successfully and need to pay EMI for another 4 years.
      Was this review helpful? 3
      , nasik
      Reviewed on Dec 07, 2019
    • HDFC Limited Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through HDFC LTD .The rate of interest was 8.25% it was nominal and all the details aboput the loan process was clearly explained by the agent .I have submitted the documents through the agent.I have got the loan amount sanctioned on time .I am satisfied with the service so far .
      Was this review helpful? 3
      , thiruvananthapuram
      Reviewed on Dec 05, 2019
    • HDFC Limited Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC Ltd.The rate of interest and the processing fee was nominal .The loan amount got on time and there was no difficulties .This loan is still active and paying the premium through EMI basis without any hassle got this loan .I am completely satisfied with the service .
      Was this review helpful? 1
      , pune
      Reviewed on Dec 05, 2019
    • Oriental Bank of Commerce Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly from Oriental Bank Of commerce .The rate of interest and the processing fee was very nominal,I have got the loan amount sanctioned on time ,There was no drawbacks faced so far on using this service .From bank end all t he detail was shared and i am satisfied with the service .
      Was this review helpful? 3
      , gurgaon
      Reviewed on Dec 01, 2019
    • HDFC Limited Home Loan
      "Need to decrease the rate of interest"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with HDFC Limited. The loan amount was Rs. 22,00,000 and the rate of interest was 8% when i was applied , but now it increased to 9.4% need to work in rate of interest. I am paying Emi monthly Rs. 18,500 and the tenure was 18 years. They have taken my documentation and also completed the verification as well executive supported me very nicely.
      Was this review helpful? 3
      , coimbatore
      Reviewed on Nov 29, 2019
    • review Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through Home First Finance company India Pvt ltd.I have got the loan on time and the rate of interest was nominal .The documents was less and the agent clearly explained the loan process very clearly . This loan s still active and paying the premium.
      Was this review helpful? 1
      , jaipur
      Reviewed on Nov 28, 2019
    • ICICI Bank Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through ICICI Bank.The rate of interest and the processing fee was medium.I have got the loan sanctioned on time .The documents was very less and each and every detail was shared clearly by the agent .This loan is still active and there was no difficulties faced so far.
      Was this review helpful? 2
      , salem
      Reviewed on Nov 26, 2019
    • DHFL Home Loan
      "Average Service"
      0.5 2.0/5 "Expected more"
      I have taken home loan directly through DHFL .The rate of interest and the processing fee was very high since had a requirement at that time taken this loan .This loan is still active and the loan got sanctioned on time .There was proper callback and follow up as well.Everything was ok but the service was average according to my point of view.
      Was this review helpful? 1
      , ahmedabad
      Reviewed on Nov 26, 2019
    • Union Bank of India Home Loan
      "Not Satisfied"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan which was taken directly through Union Bank of India .The rate of interest was less it was 8.5% and still this loan is active .I have got the loan amount without any delay .All the required details about this loan was shared by the agent. According to me the service is not satisfied .
      Was this review helpful? 3
      , cuttack
      Reviewed on Nov 25, 2019
    • Axis Bank Home Loan
      "Good Service"
      0.5 4.5/5 "Excellent!"
      I have taken home loan directly through Axis Bank .The rate of interest and the processing fee was nominal and the got the loan amount on exact time frame .I am paying the premium through EMI basis .All the detail about the loan process was clearly shared by the agent .I have submitted the required documents and the process was really satisfied .
      Was this review helpful? 3
      , chennai
      Reviewed on Nov 23, 2019
    • IIFL Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I have taken India Infoline Housing Finance Limited directly .I have got the loan on delay basis it took 2 months of time and not got the reason for the delay .This loan is still active and there was no callback and follow up from India infoline .I have submitted the required documents and there was no drawbacks faced so far.
      Was this review helpful? 4
      , new delhi
      Reviewed on Nov 23, 2019
    • BAJAJ HOUSING FINANCE LIMITED HOME LOAN Home Loan
      "Misleading & dangerous"
      0.5 0.5/5 "Unacceptable"
      Bajaj Housing Finance tries all tricks to loot me - 1. Just before disbursement day, they hiked the Processing fee and increased the interest rate 2. After EMI stated, they suddenly hiked the EMI for one month by 20,000 due to a system issue at their end. 3. They arbitrarily deduct charges from your bank account in small amounts without telling and authorizations and randomly through a month. 4. Customer service and its Head are completely nonchalant and they fake ignorance. 5. It takes 5-6 months to resolve one issue. By that time, they will create another issue and you spend the next 5 months chasing them for its resolution. Beware the NBFCs for housing finance. Its always better to go to the leading banks.
      Was this review helpful? 1
      , kolkata
      Reviewed on Nov 23, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have applied for Home loan directly through HDFC Limited .The rate of interest was very less it is only 8.35 or 8.55% criteria but i am not sure about the exact percentage .The premium is paid on EMI basis and got the loan amount on time and not faced any difficulties .I am totally satisfied with the service.
      Was this review helpful? 1
      , mumbai
      Reviewed on Nov 22, 2019
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