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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