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A personal loan is a credit instrument offered by bank to help you meet your financial needs, without pledging an asset to guarantee repayment. Compared to other loans, the level of difficulty in getting a personal loan is much higher. Generally, personal loan applications are processed faster, and in most cases it takes less than a week to get it sanctioned. The interest rates on personal loans varies for different banks which usually falls in the range of 15% to 20% per annum. Closing a loan should be of top priority as the burden of debts keeps piling up if left unattended for longer periods.
There are various modes of repayment available for personal loans. Today, many banks have facilitated customers with an option to repay their loans before the period mentioned in the loan agreement. Still there are banks that do not allow part payments at all. So make sure that you are clear with the terms and conditions before applying for a loan. Given below are the types of closures available for personal loans:
Pre-closure: If the loan amount can be cleared before end of the tenure, it will help you save a lot on EMIs. Banks generally demand a lock-in period of one year, after which the remaining amount can be repaid altogether. Earlier, banks used to levy pre-closure charges while clearing the loans before date. But with the new RBI directive in place, no banks will be allowed to penalize for the pre-closure of floating loans.
Regular closure: In this type of closure, the borrower pays off EMIs at regular intervals and closes the loan at the end of the tenure mentioned in the loan agreement. Here the process takes place without involving any additional terms and conditions.
Bad loan closure: Bad loan is a loan where the borrower has defaulted on interest payments continuously for a certain period. Generally, banks write off bad loans in cases where the borrower is unable to repay the amount due to bankruptcy or other financial losses.
Personal loans are definitely the quickest means of fulfilling your unexpected financial needs. However, it is equally important to close the loan at the earliest, as it will have an impact on your credit history and savings.