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

    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 Apr 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.

    Home Loan - Sitemap

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    Home Loan Preclosure Reviews

    • DHFL Home Loan
      "Not satifactory service"
      0.5 1.0/5 "Really Bad"
      I got home loan with DHFL FINANCIAL INSTITUTION . I am not happy with the services even the customer service response is not so good . The loan amount which they gave was good but they charge very high rate of interest . Overall it is fine experience .
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 22, 2019
    • LIC Housing Home Loan
      "Should be transparent and prompt"
      0.5 1.0/5 "Really Bad"
      I have housing loan from LIC, the interest is high. My property located in lucknow but I am staying in mumbai hence for the balance transfer its very difficult they need lots of loan documents. Without proper notification they increased the interest but for the reduction they have lots of procedure and I need to pay Rs.1000.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 22, 2019
    • LIC Housing Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      LIC HOUSING FINANCE has also offered me a home loan. The process was quick and I got the loan on time. The rate of interest is and there were processing charges as well both are very nominal compare to others in the market . The tenure period is 10 year and it is sufficient .
      Was this review helpful? 0
      , vadodara
      Reviewed on Apr 21, 2019
    • review Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have SHAMRAO BANK i have took home loan from this bank . Their service is better, Overall the whole loan process was easy and hassle free. Only the rate of interest were high with this bank. The processing fee is nominal with this bank . And the loan amount is not satisfactory .
      Was this review helpful? 0
      , pune
      Reviewed on Apr 21, 2019
    • HDFC Limited Home Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      HDFC LIMITED is the bank where i have taken the housing loan the loan amount they have offered was good and satisfactory added on that the documentation process was simple and pretty simple documents. I got the loan within one day, the rate of interest was nominal.
      Was this review helpful? 1
      , bangalore
      Reviewed on Apr 20, 2019
    • DHFL Home Loan
      "Very good service"
      0.5 4.0/5 "Great!"
      I had taken a Home Loan from DHFL LTD a long time back and the loan is still running. The loan amount has been sufficient but the interest rate with them has been quite high, where they had not reduced the interest rate as well. The processing fee and charges which they had made has also been high when compared with the other banks.
      Was this review helpful? 1
      , faridabad
      Reviewed on Apr 20, 2019
    • HDFC Limited Home Loan
      "Interest rate should be reduced"
      0.5 4.0/5 "Great!"
      My housing loan process was simple with HDFC Ltd, they took only 3 working days to verify and sanction the amount, they didn't ask any guarantor for my loan, but I feel the interest is bit higher, I took the amount of Rs. 5 lakhs for the duration of five years.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Apr 20, 2019
    • ICICI Bank Home Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have applied or the housing loan with the ICICI BANK the documentation process was simple and easy to get the loan they have given the 95% of value as a loan amount. The duration for repaying the loan is for 20 years and using from last 2 years. The rate of interest was 8.6% which was nominal.
      Was this review helpful? 2
      , pune
      Reviewed on Apr 19, 2019
    • LIC Housing Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I took my housing loan with LIC HOUSING FINANCE previously, They gave me sufficient loan amount based on the requirement, but i felt they have charged me high rate of interest and even they have charged me processing fee high, so i have done balance transfer to other bank.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Apr 19, 2019
    • Bajaj Finserv Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I did balance transfer from one bank to Bajaj finserv for housing loan, the loan amount was sufficient, but rate of interest i felt was less compare to other bank loan, the rate of interest they have charged me up to 8.85% which was nominal, everything is good but i did not like one thing ,like after doing balance transfer i came to know that it is mandatory to pay insurance for premium it use to get lock after paying insurance, i can not do in future balance transfer .
      Was this review helpful? 2
      , hyderabad
      Reviewed on Apr 19, 2019
    • Indiabulls Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I hold my housing loan with Indiabulls for an while. They have given me loan on time without any delay, their service was good. The process in getting loan was simple, i got loan on time. Their rate of interest was nominal, still this loan is running.
      Was this review helpful? 2
      , new delhi
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Very good"
      0.5 4.0/5 "Great!"
      Last 4month back I took one home loan from HDFC Limited , but I am not satisfied with their rate of interest since it is little high , and loan amount is 30L I am satisfied with loan amount and and EMI amount is 25K and tenure is 25years , but their customer service is not much good ,and response not at a time.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Best service"
      0.5 4.5/5 "Excellent!"
      I hold my housing loan with HDFC LIMITED for an while, their service is good, but not sure about the rate of interest like every 2-3 months they are increasing my limit up to 0.05% i need to check with the customer care regarding this, the loan amount was sufficient, they have not charged me processing fee.
      Was this review helpful? 1
      , bangalore
      Reviewed on Apr 19, 2019
    • IIFL Home Loan
      "NOT SATISFIED"
      0.5 1.0/5 "Really Bad"
      I have previously used the housing loan with the INDIA INFOLINE HOUSING FINANCE LTD and transferred to another bank because the rate of interest was higher. They have offered the pre approved so taken. There are hidden charges applicable also it is floating rate of interest with this bank which was 32% which am not happy.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "GOOD"
      0.5 4.0/5 "Great!"
      The documentation process was easy and simple with the HDFC LIMITED and housing loan was taken before few days. The rate of interest was lesser so transfered the loan with this bank. The duration is for 30 years to repay the loan. There is a pre closure option with this loan.
      Was this review helpful? 2
      , mumbai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Very good"
      0.5 4.0/5 "Great!"
      I am satisfied with loan amount of 8L with the rate of interest is 8.65% , EMI amount is 6769 rupees and tenure is 20years. It was taken last two years back from HDFC LIMITED and their overall service is good but I would like close this loan after 3 to 4 months.
      Was this review helpful? 2
      , new delhi
      Reviewed on Apr 17, 2019
    • Bank Bazaar Home Loan
      "balance transfer"
      0.5 4.0/5 "Great!"
      i like your offer...t is the first time experience with the Bankbazaar.com and i have a good experience with this channel. I prefer using it through the mobile application as the application is simple and user friendly to access. The customer service is good.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 17, 2019
    • Axis Bank Home Loan
      "Process is good"
      0.5 5.0/5 "Blown Away!"
      My home loan is with Axis Bank and the process to get the loan is good. The disbursement happened on time and the customer support and response is good. The documentation was also a smooth process. The rate of interest and processing charges is normal.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 17, 2019
    • IDBI Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I took housing loan with IDBI bank for an while, the loan amount which they have given me was good, it was sufficient based on my requirement, the rate of interest and their processing fee which they have charged me was nominal, AS it is government bank their service is not that up to the mark, but the interest rate was less so i applied.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 17, 2019
    • LIC Housing Home Loan
      "Interest rate should be reduced"
      0.5 4.0/5 "Great!"
      LIC housing is good but interest is the concern, I took the amount Rs. 20 lakhs for 20 years. They quoted 10.8% its a floating one, they didn't revise the interest as per the RBI guideline. But they do have balance transfer, part payment and other options.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 17, 2019
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