HDFC Bank enables a personal loan borrower to make a pre-closure or a pre-payment of loan. However, you will be able to prepay your HDFC personal loan only after 12 months after you have procured your loan and after paying 12 EMIs plus the foreclosure charges that may be applicable.
Accordingly, does home loan prepayment reduce principal?
However, there will be a lesser amount to spend on a monthly basis, after paying the EMI. “If you plan on prepaying your home loan, the advantages include savings on interest expenditure, reduction of principal outstanding, financial stability and effect on credit rating.
Also, does prepayment reduce interest?
A lower principal amount means lower interest and EMI payments. Home loan prepayment: If there is an opportunity to prepay a part of the home loan before the end of its tenure, then it can reduce the overall interest payments.
How does prepayment work in home loan?
Your home loan is repaid through equated monthly instalments, or EMIs. Each EMI is made up of interest payable on your loan and part principal repayment. Taking a home loan during your Twenties or Thirties gives you sufficient time to pay off your loan before retirement.
Choosing between EMIs and tenure reductions
While a reduction in the loan tenure will result in greater savings in interest pay out, opting for the EMI reduction option will lead to higher disposable income.
If your total interest outgo is greater than the amount of tax deduction then it is wise to invest the surplus money in closing/reducing the home loan. … In such cases, it is not advisable to foreclose the loan because the tax benefits will bring down the effective interest rate.
A home loan offers a number of benefits which may make prepayment unbeneficial. Prepayment is a facility which allows you to repay your housing loan (in part or full) before the completion of your loan tenure. Usually, customers opt for prepayment when they have surplus funds.
Pre-EMI is a concept that is used for properties that are under construction. In this case, you get your loan disbursed in stages based on the instalment amount you need to pay the developer. You are generally required to start paying only the interest on the loan amount disbursed (called the pre-EMI interest).
What Are Home Loan Prepayment Charges? A prepayment penalty is a fee or charge that you have to pay to the bank if you decide to repay the loan before the end of its term. As a borrower, you may decide to close your loan before time to reduce your borrowings and monthly interest burden.
“It is better to reduce tenure if you are comfortable paying the same or a marginally higher EMI. … If the home loan rate is reduced by 0.25% to 10.75%, the EMI would come down by Rs 848 to Rs 50,671. Now if you can afford to pay the same or a little over the old EMI, you can reduce the tenure of your loan.