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

    • HDFC Limited Home Loan
      "Not satisfactory"
      0.5 4.0/5 "Great!"
      I took a home loan with HDFC LIMITED and its been completed now. Whenever I want to reduce my EMI as per Government ROI and they have been charging money from customer which is not good. I have paid Rs.3000 and secondly paid Rs.2300 in 8 years period. Actually they should reduce ROI as per changes in Government without any charges where SBI is not charging.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jul 20, 2019
    • HDFC Limited
      Bank Bazaar Home Loan
      "Customer friendly"
      0.5 4.0/5 "Great!"
      From bankbazaar, we can check our eligibility for applying the loan and we no need to ask with anyone. Bankbazaar people are calling me once i visit the website for any particular product and helping out the customer based on their query. I come to know about the website from Social media.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 20, 2019
    • HDFC Limited Home Loan
      "Customer friendly"
      0.5 5.0/5 "Blown Away!"
      Since the rate of interest is less i have chosen the home loan with HDFC. They have provided me a interest rate of 8.60% for the loan amount of Rs. 15 years. I chose the tenure period of 20 days. Documentation process was quite smooth. I checked my eligibility through online.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 20, 2019
    • Dena Bank Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan through Dena Bank since builder referred this Bank .I have got all the required details about the loan process ,I have applied for the loan amount of 15 lakh for the tenure of 15 years ,The rate of interest and the processing fee was quite nominal ,Still the loan is active and the agent gave all the information about the card process .
      Was this review helpful? 0
      , pune
      Reviewed on Jul 20, 2019
    • SBI Home Loan
      "Above Average"
      0.5 5.0/5 "Blown Away!"
      I took a home loan with State Bank of India mainly for the interest rate which is 8.77%. Its almost going to be a year and the loan tenure is 30years. I have purchased a residential property. There is no hassle in processing the loan and it went smoothly.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 20, 2019
    • HDFC Limited Home Loan
      "Should provide privilege benefits"
      0.5 3.0/5 "Satisfactory"
      HDFC Limited unable to give the top up loan for the property construction since I am an existing customer. I took the total outstanding of Rs.24.80 with the duration of 20 years. The loan process was not user friendly, they multiple documents was there and I paid the charges for the loan formalities. Hence I moved to Bajaj Finserv.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Jul 19, 2019
    • Bajaj Finserv Home Loan
      "Charges should be reasonable"
      0.5 5.0/5 "Blown Away!"
      My home loan is running Bajaj Finserv, the interest rate is good around 8.90 for per annum its a floating one, the process was very good and quick. I took the loan amount of Rs. 30 lakhs for the duration of 15 years. They do have balance transfer, part payment option. I done the balance transfer from Hdfc limited to Bajaj Finserv. But the cheque bounce charges are more they are taking Rs.3000 per transaction.
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Jul 19, 2019
    • DHFL Home Loan
      "NOT SATISFIED"
      0.5 1.0/5 "Really Bad"
      I am not satisfied with the loan because i have submitted all of the documents but i have not received the 3rd dispersal amount which is almost many months past. The loan amount was 10.70L, the rate of interest was 8.5%, the customer support is not good. The duration for repaying the loan was 15years.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jul 19, 2019
    • review Home Loan
      "Excellent Loan services"
      0.5 5.0/5 "Blown Away!"
      Since my friend has recommended me about the EDEL WEISS for the home loan purpose. They have given me a interest rate of 10.5%. I have applied the loan amount of Rs. 25 lakhs and they have sanctioned the loan in 4 days and its a very good company for home loan. Even difficult profile customer can get the loan from here. There was a easy documentation process.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 19, 2019
    • DHFL Home Loan
      "Service is not up to the mark"
      0.5 1.0/5 "Really Bad"
      I came to know about the DHFL loan i went direct to the office and collected form and applied for it. I wish to say that their service is not up to the mark. They just want the client to apply and want to achieve their target and they keep on changing their rate of interest was application was submitted.
      Was this review helpful? 0
      , pune
      Reviewed on Jul 19, 2019
    • Axis Bank Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I was offered with Axis bank Housing Finance Loan with the nominal rate of interest of 8.5% . I have applied for 16 lakh but they offered me up to 20 lakh which makes me more satisfy. There documentation was done very smooth and staff were very responsive all went good.
      Was this review helpful? 1
      , pune
      Reviewed on Jul 19, 2019
    • SBI Home Loan
      "It can be better"
      0.5 4.0/5 "Great!"
      I took a home loan with SBI and its been 3 years. I have purchased a residential property. There was a delay in the loan process because the bank person is on leave so it took more than 30 days for the approval. The interest rate and processing fee is nominal. I opted the loan for 30 years.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Jul 19, 2019
    • Bank Bazaar Home Loan
      "Nice service "
      0.5 4.5/5 "Excellent!"
      Bank bazaar is a best opportunities for loan and all insurance .......................................................................................................................................................
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 18, 2019
    • review Home Loan
      "Need to decrease charges "
      0.5 2.0/5 "Expected more"
      I have taken a home loan in MAHINDRA HOME FINANCE for more than 4 years before. The loan amount sufficient which was given from bank for the tenure of 5 years. The process was smooth. On time loan got sanctioned. But the rate of interest and fee are high. Cheque got bounce for twice then went directly to bank to pay the money. Due amount was detected from my account without any intimation.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Jul 18, 2019
    • Bank Bazaar Home Loan
      "Very Active Service"
      0.5 3.5/5 "Pretty good"
      Quick response to the customer Facility is very good by Bank Bazar. Very Good Service. I can not believe that home loan will be applied so fat but bankbazar.com find it hassel free and made my loan fast. I check my credit score daily by the link sent by Bankbazar.com.
      Was this review helpful? 0
      , dehradun
      Reviewed on Jul 18, 2019
    • HDFC Limited Home Loan
      "Good Loan provider"
      0.5 4.0/5 "Great!"
      I got the HDFC bank home loan 10 years back at the time the team was very good and now the service is not upto the mark. At the time, the HDFC was there which was provided the home loan on easy basis and the loan tenure is going to over in next 3 years. They have sanctioned the loan in one month. They took shortest time to provide the loan.
      Was this review helpful? 0
      , dehradun
      Reviewed on Jul 18, 2019
    • HDFC Limited Home Loan
      "Good"
      0.5 4.5/5 "Excellent!"
      I have taken a home loan in HDFC bank for more than 4 years ago which was applied through an other channel. The loan amount was sufficient for the tenure of 20 years. On time loan got sanctioned and the process was good. The rate of interest and processing fee are okay.
      Was this review helpful? 2
      , thane
      Reviewed on Jul 16, 2019
    • SBI Home Loan
      "Need to be process at earlier"
      0.5 3.0/5 "Satisfactory"
      I was taken a home loan in STATE BANK OF INDIA before 10 years ago. At the time they have asked so many documents to submit for a verification purpose and the process was too long faced difficulties to complete the process took 2-3 months to get sanctioned. The loan was low for the tenure of 10 years. The rate of interest and fee are nominal.
      Was this review helpful? 1
      , amravati
      Reviewed on Jul 16, 2019
    • HDFC Limited Home Loan
      "Not Satisfied with the Service"
      0.5 3.0/5 "Satisfactory"
      I have applied for HDFC LTD Home Loan through Online .I have not got any information about the loan process through the agent ,I have not got any information about the rate of interest and the processing fee .I have not taken this loan since there was no proper response and not satisfied with the service .
      Was this review helpful? 0
      , kolkata
      Reviewed on Jul 16, 2019
    • DHFL Home Loan
      "Nice service"
      0.5 4.0/5 "Great!"
      This is bond process hence they have completed all the process within 1 week. They have delivered the cheque very fast. I have taken my home loan from DHFL. They have charged me a interest rate of 9% and its a zero processing fee. I have chosen the tenure period of 20 years and their service has been prompt.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 16, 2019
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