Prepayment is when a borrower decides to use his savings i.e bonus from his employer, or any other amount received from a sudden financial breakthrough to pay off their loan and reduce their overall financial burden. Doing so has certain benefits which are unavoidable and lucrative in nature. Check them below.
> Savings on the Interest Rates
When your financial advisor suggests you to take a Loan Against Property at Low Interest Rates for a smaller tenor, it is said to save some of your money. A longer repayment tenor means a higher amount paid as interest towards the loan, which can be saved to a great extent by prepaying or part-prepaying the loan either in parts or in full, whenever the finances are in stable condition.
> Reduction of Total Payable Amount
As explained above, prepayment of your loan against property, be it in parts or in full, help you lower down the payable interest i.e your total payable amount. Every time you contribute a significant amount for prepayment of your loan, your principal component decreases and the interest is re-calculated, resulting in a reduction of the financial obligations.
> Tax Benefits on Prepayment Amount
Lastly, the amount that you use to repay your loan is eligible for tax deduction under section 80C and section 24 of the Income Tax Act on repayment of the loan. However, there are certain conditions applicable for claiming the same, and you must check them beforehand.
In the end, as per us, prepaying is always beneficial and in favor of the loan borrower. However, you should always take necessary precautions before taking the final decision. Read more to know about: What is Prepayment of Loan against Property?
Alisha Antil is your best financial helper for insurance. She has a vast experience in finance and insurance and provide to you the expert advise in insuring your property and health.
No comments:
Post a Comment