When is making a prepayment on a loan against property not advisable?

2 min read

Prepayment is a feature that borrowers can avail to pay a part of the outstanding loan early or foreclose the entire loan before the tenor ends. This technique helps reduce the overall cost of the loan. However, it may not always be wise to prepay a loan against property.

Prepayment in property loan – Times when it is not wise to avail

Sometimes prepayment is not beneficial, below can be the scenarios

  • At the end of loan repayment tenor: During the initial period of the repayment tenor, the interest component of the EMIs is much higher than the principal component and this is when you should make prepayments. If you wait till the mid-to-late stage of repayment, your interest savings may not be much.
  • If you get higher returns on other investment: Consider the returns you can gain by investing your surplus money in a financial instrument. If the returns are higher than the interest saved through a prepayment, as per the applicable mortgage interest rates and charges, then it is wiser to invest.
  • When prepayment charges are higher than the interest saved: The applicable charges on a prepayment may outweigh your interest savings. In such a circumstance, opting for a prepayment may not be profitable.

You can prepay a Bajaj Finserv Loan Against Property against nominal charges. Both part-prepayment and foreclosure facilities are available at nil charges for individuals availing a loan against property at a floating rate of interest.

Our loan against property eligibility criteria are also simple. To avail a substantial loan amount, learn how to apply for loan against property.

This is especially beneficial for those, who want to move to another lender, for lower home loan rates and better terms. However, the case may not be the same for home loans with a fixed interest rate. Some lenders may charge a prepayment penalty, varying from 1% to 3% on fixed rate loans.

To find out whether you are eligible for the Bajaj Finserv Home Loan Balance Transfer, make use of the home loan eligibility calculator to make your application today.

Check and Apply Now for loan Prepayment through Bajaj Finserv Portal.

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Frequently asked questions

Can we foreclose loans against property?

Foreclosure is a legal process where a lender can seize and sell a property when a borrower fails to meet loan obligations, typically due to non-payment. The process involves issuing a Notice of Default, allowing a grace period for corrective action, and may lead to a lawsuit or foreclosure proceedings. The property is then sold, with the proceeds used to repay the outstanding loan. Foreclosure laws vary by jurisdiction, and borrowers should be aware of their rights. Lenders may explore alternative solutions before resorting to foreclosure, such as loan modification or refinancing.

How many times prepayment can be done?

The number of times prepayment can be made on a loan is determined by the terms outlined in the loan agreement. These terms vary based on the type of loan and may include considerations such as prepayment penalties or fees. Borrowers should review their loan agreement, communicate with their lender, and be aware of any regulatory restrictions or third-party servicer policies that could impact the prepayment process. Understanding these terms is crucial before making additional payments on the loan.

Is prepayment allowed in loan against property?

Whether prepayment is allowed on a loan against property depends on the terms specified in the loan agreement. Many loans against property do permit prepayment, but borrowers need to review the agreement for details. Considerations include potential prepayment charges, distinctions between partial and full prepayment, and communication with the lender to understand the process. Regulatory considerations and third-party servicer policies may also influence prepayment options. It is crucial for borrowers to be aware of the specific terms and potential charges associated with prepayment before making any additional payments on the loan.