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

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  • Preclosing a home loan simply means paying off your home loan way before the term of the mortgage is done. This can be done for various reasons such as refinancing, saving on interest, etc. Sometimes a borrower can refinance his/her housing loan with another bank merely because the bank is willing to provide a lower rate of interest on the home loan than the bank that the borrower is currently indebted by. In this case, the borrower simply applies for a loan in a desired bank, and upon approval, the bank pays off the existing loan in full, thereby allowing the borrower to avail a loan with a lowered interest rate.

    A borrower can also preclose a housing loan to save up on interest. Closing off a loan before the term is due allows the borrower to evade a part of the interest. Any interest he/she was supposed to pay post preclosure will automatically be waived off on closing the loan. However, one must take into consideration the home loan preclosing charges that a bank may charge before preclosing. Sometimes, it would not make sense to preclose the loan as the charges levied on home loan preclosure exceed the amount that can be saved by paying off the loan in full.

    Banks usually dispirit borrowers to prepay housing loans as the borrower would end up repaying lesser to the bank than if he/she had to finish off the entire tenure of the loan. This is why a bank or lender usually charges a preclosure fee.

    Home loan preclosure fees of banks - 23 Oct 2019

    Bank Preclosure charges Prepayment charges
    PNB Housing Finance Limited Nil Nil
    ICICI Bank Nil Nil
    HDFC LTD. Nil Nil
    Indiabulls Nil Nil
    Sundaram Home Finance Nil Nil
    Axis Bank Nil Nil
    DBS Nil Nil
    Aditya Birla Housing Finance Limited Nil Nil
    Gruh Finance Limited Nil Nil
    Oriental Bank of Commerce Nil Nil
    DHFL Nil Nil
    LIC Housing Finance Limited Nil Nil
    Federal Nil Nil
    State Bank of India Nil Nil
    Andhra Bank Nil Nil
    Dhanalakshmi Bank Nil Nil
    Bank of Baroda Nil Nil
    Bank of India Nil Nil
    Bank of Maharashtra Nil Nil
    Canara Bank Nil Nil
    Dena Bank Nil Nil
    IDBI Bank Nil Nil
    Indian Overseas Bank Nil Nil
    Karur Vysya Bank Nil Nil
    South Indian Bank Nil Nil
    Tamilnad Mercantile Bank Nil Nil
    Central Bank of India Nil Nil
    India Shelter Finance Corporation Nil Nil
    AAVAS Financiers Limited Nil Nil
    Reliance Home Finance Limited Nil Nil
    TATA Capital 2% Nil
    Kotak Mahindra Bank Nil Nil
    Jammu & Kashmir Bank Nil Nil
    Yes Bank Nil Nil

    3 Easy steps to preclose home loan

    1. Write to the bank, in detail, about the status of your housing loan
    2. Make sure that you are returned all official documents and the bank has provided you with a No Objection Certificate (NOC) claiming that there are no outstanding dues to be paid by you
    3. Another NOC has to be availed by the bank stating that both parties, i.e, the bank and the borrower, has duly agreed to pay off the loan

    Types of home loan closures

    The various types of home loan closures are as follows:

    1. Preclosure - Preclosure, as mentioned earlier, is the closing of the housing loan by paying the entire amount due towards the loan before the intended tenure of the loan.
    2. Regular closure - Regular closure is the closure of a home loan on completion of the tenure. The natural intended course of the loan takes place and the loan is resolved as per the tenure agreed on application of the loan.
    3. Bad loan closure - in few cases, if a borrower is unable to pay off a part of the loan, banks may waive off the fee after careful consideration of the situation. However, in most cases the collateral given to the bank for the loan will be compromised or the guarantor will be questioned, if applicable.
    4. Settled loan closure - Settled loan closure is a situation wherein a borrower is unable to pay off the entire loan amount and therefore, the lender offers the borrower a discounted rate to pay towards the overdue amount of the loan. The remaining amount is then waived off.

    Documents required after closing off a housing loan

    After closure of a home loan, it is the lender’s duty to hand over all the required documents back to the borrower. After all dues have been paid to the bank, the documents mentioned below must be collected from the lending institution.

    • In the event that the loan account holder has expired during the course of the loan, the property documents in the POA (Power of Attorney) format must be collected without fail from the lender.
    • In order to attain the property documents, the legal heir or nominee must write a letter to the bank or financial institution requesting for the same.
    • A letter of abdication relinquishment must be written in order to surrender the property to the legal heir or nominee.

    6 Thing to remember during home loan preclosure

    1. Collecting the documents – While applying for the housing loan, original documents of the property must be handed over to the bank. These documents must be collected back from the bank on closure of the loan.
    2. Collecting the No Objection Certificate – The No Objection Certificate or NOC is a statement by the bank acknowledging that you have paid all your dues.
    3. Update your credit score – Once the loan has been closed, you need to request the bank to update your credit score. This will help you avail loans easily in future.
    4. Don’t forget to carry your government issued identification card. This is of utmost importance in order to close off a loan.
    5. A cheque book must also be kept handy as you may need to pay the final settlement of the housing loan.
    6. An acknowledgement of the payment made towards the loan must be taken from the bank. This must be duly stamped and signed by an authorized bank official.

    Demerits of preclosing a home loan

    • A charge is levied on preclosure. And in the event that the penalty on preclosure exceeds the interest saved on the loan, it becomes irrational to preclose the loan.
    • Preclosing a housing loan means that you lose a big chunk on money in one go. This can be beneficial in saving interest but becomes a burden to an individual as he/she loses out on a lot of money instantly, often damaging the lifestyle of that person.

    In conclusion, prepaying a loan can help save some money. However, it must be done after careful calculation, as sometimes it may very well be that you are not saving any money. Also, the lump sum outflow of money can be a detriment to a person’s lifestyle and daily requirements.

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    Home Loan Preclosure Reviews

    • Canara Bank Home Loan
      "Medium"
      0.5 3.0/5 "Satisfactory"
      I have taken a home loan with CANARA bank on 1 year before, with the good amount for the tenure period of 20 years. The rate of interest 8.9% was okay. More than 3 months to get a card. EMI payment is nominal. I use to get remainder message on time. But their service is not good and no prompt.
      Was this review helpful? 0
      , thane
      Reviewed on Oct 21, 2019
    • Indiabulls
      Indiabulls Home Loan
      "Good Loan Service"
      0.5 5.0/5 "Blown Away!"
      The rate of interest are very high in India bulls, if they are not reducing the interest obviously the customers will move to different banks. India bulls will provide 99% loan to the customer which is a catchy things which other banks don't. They offered me a rate of interest is 14%. It was a pre-approved loan. I have taken the loan amount of Rs. 26 lakhs for the tenure period of 20 years.
      Was this review helpful? 0
      , thane
      Reviewed on Oct 20, 2019
    • IIFL Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      From IIFL, i have taken the home loan and the process was not lengthy and the follow up was good. IIFL people approach was prompt and they offered me a low interest rate of 8.35% and the loan amount also they have increased what I'm looking for. Earlier they offered me only Rs. 15 lakhs after that they have sanctioned more than 16 lakhs.
      Was this review helpful? 1
      , mumbai
      Reviewed on Oct 17, 2019
    • HDFC Limited Home Loan
      "Hassle Free Loan"
      0.5 5.0/5 "Blown Away!"
      HDFC is a hassle free and quick loan services. Everything was done through online so no paper work required. I had applied the loan amount of Rs. 30 lakhs. They have sanctioned the loan in 5 days. Its floating interest rates and there was no hidden charges. I have chosen the tenure period of 15 years. If the RBI is reducing the interest rate but they decreased the same after 1 year but increment is happening immediately.
      Was this review helpful? 1
      , thane
      Reviewed on Oct 17, 2019
    • LIC Housing Home Loan
      "Good Loan service"
      0.5 4.0/5 "Great!"
      I got the good interest rate of 8.5% from the LIC housing with minimal documents. Overall process also very fast and good so i have chosen this bank. I had applied the loan amount of Rs. 17 lakhs and i have chosen the tenure period of 10 years. Totally, i'm satisfied with the loan service provided by LIC.
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 17, 2019
    • SBI Home Loan
      "It's okay"
      0.5 4.0/5 "Great!"
      I had a home loan with State Bank of India and it was closed without any issues. They took longer time for the verification and lot of paper works. The interest rate is flexible and fine. There are charges for processing fee and plus insurance fee.
      Was this review helpful? 2
      , thiruvananthapuram
      Reviewed on Oct 17, 2019
    • Corporation Bank Home Loan
      "Best Service"
      0.5 4.0/5 "Great!"
      I have taken Home loan directly through Corporation Bank .I have applied for the loan amount of 12 lakhs for the tenure of 18years .More documents collected for this home loan and got the loan amount on time and it was really sufficient .There was no drawbacks faced so far .I am satisfied with the service .
      Was this review helpful? 1
      , mumbai
      Reviewed on Oct 16, 2019
    • HDFC Limited Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I had applied for home loan with HDFC limited on few months before, they have sanctioned a loan for 22 lakhs but due to some problem of my builder from my end I kept on hold for the loan process. They have detected for the processing fee of 11 thousands but they refunded 9 thousands rupees. The tenure of 15 years. Interest rate was nominal of 8.55%.
      Was this review helpful? 0
      , kanchipuram
      Reviewed on Oct 15, 2019
    • HDFC Limited Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      With HDFC limited I have taken home loan on 8 months before which was processed through them directly. They have approved for 8 lakhs but as of now I have taken only for 5 lakhs remaining 3 lakhs I will get later from their end. Due to shop will come in commercial loan so I have split the loan amount to get it. For the tenure of 15 years. The processing fee for 5000 rupees. The rate of interest 8.8%, they have sanctioned the loan within one month.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Oct 15, 2019
    • Punjab National Bank Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have availed Home loan directly through Punjab National Bank .The rate of interest and the processing fee was very high ,I have got the loan amount on delay basis and i have applied for 26 lakhs for the tenure of 15 years.I have not faced any difficulties until i have received the loan .
      Was this review helpful? 0
      , new delhi
      Reviewed on Oct 14, 2019
    • SBI Home Loan
      "Excellent Loan Service"
      0.5 5.0/5 "Blown Away!"
      SBI Home Loan is excellent because I've a salary account with them. They offered me a interest rate of 9.5% approximately. I took the loan amount of Rs. 23 lakhs so far i have got only Rs. 16 lakhs since my building is under construction. My EMI is not yet started. They sanctioned the loan in 2 working days.
      Was this review helpful? 1
      , dindigul
      Reviewed on Oct 14, 2019
    • SBI Home Loan
      "Easy and best loan"
      0.5 5.0/5 "Blown Away!"
      SBI is a best bank and they had a better option. There is only simple documentation required and executive came to my place for collecting all the documents. I got the loan within 7 days. SBI did not taken any processing charges and they gave better and cheap interest. They take minimal time and better response from the customer care so i had chosen SBI for my home loan.
      Was this review helpful? 1
      , agra
      Reviewed on Oct 11, 2019
    • Central Bank of India Home Loan
      "Highly recommendable bank"
      0.5 5.0/5 "Blown Away!"
      My home loan was purchased from Central bank of India. The branch offer was approved the loan immediately and they had a good behavior with the customer. I got the better clarity about the loan process as well as the rate of interest in central bank of India is less than compared to others so i have chosen this bank and the Branch Manager helped me in a better way.
      Was this review helpful? 3
      , bhubaneshwar
      Reviewed on Oct 05, 2019
    • DHFL Home Loan
      "Need to decrease interest charges"
      0.5 5.0/5 "Blown Away!"
      From DHFL I have taken a home loan almost more than a year. One of my cousin's friend working there he recommend to apply for a home loan. The process was smooth and sanctioned a loan within 6 days with sufficient amount of 20 years. The rate of interest was high.
      Was this review helpful? 4
      , vijayawada
      Reviewed on Oct 05, 2019
    • ICICI Bank Home Loan
      "Average Loan service"
      0.5 3.0/5 "Satisfactory"
      ICICI bank has provided me a home loan at the time of i want on a immediate basis. Since the necessity is over they have provided me a timeliness loan. I taken the loan amount of Rs. 10 lakhs and the have charged me a higher interest rates which i'm not comfortable with.
      Was this review helpful? 1
      , mumbai
      Reviewed on Oct 05, 2019
    • HDFC Limited Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I have balance transfer for a home loan with existing finance to HDFC LIMITED. One month before only I have a transfer of a loan. They have outstanding amount of 10 lakhs for the tenure period of 10 years. The rate of interest is 8.6% only for mortgage charges for 8 thousands need to pay for it.
      Was this review helpful? 1
      , goa
      Reviewed on Oct 04, 2019
    • review Home Loan
      "Need to decrease charges & improve customer service "
      0.5 1.0/5 "Really Bad"
      I have taken a home loan with SUNDARAM FINANCE on 10 years before which was processed through them directly. The amount which was given for 13 lakhs for the tenure period of 20 years. There was lot of issues I faced with them customer service is not good response. The rate of interest was high of 14% compare to other.
      Was this review helpful? 1
      , goa
      Reviewed on Oct 04, 2019
    • SBI Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through State Bank Of India .The rate of interest and the processing fee was nominal ,I have got the loan amount on time and got a clear picture about the loan process ,I have availed this loan for the tenure of 20 years .I have completed only 2 years of EMI so far .,
      Was this review helpful? 6
      , vizianagaram
      Reviewed on Oct 04, 2019
    • Central Bank of India Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have taken Home loan directly through Central Bank OF India ,I have got the loan on exact time ,The rate of interest and the processing fee was nominal ,I have got all the details about this loan very clearly through bank agent.The process was very easy and still this loan is active .
      Was this review helpful? 2
      , ramanathapuram
      Reviewed on Oct 04, 2019
    • SBI Home Loan
      "Good"
      0.5 5.0/5 "Blown Away!"
      Nearly 11 years before I had taken a home loan with STATE BANK OF INDIA which was processed directly to them.The loan amount was sufficient for the tenure period of 15 years. The rate of interest and processing fee are nominal. They have sanctioned a loan within few days and the process was good.
      Was this review helpful? 3
      , itanagar
      Reviewed on Oct 04, 2019
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