Prepayment of principal of loan against property allows borrowers to keep the property while still keeping its value. This strategy proves emotionally, financially, and personally beneficial to loan borrowers. The Property Loan Interest Rates is quite low in comparison to other loans available. By doing this they can minimize future expenses, increase one’s equity in the house and relieves you of the mental pressure of having to pay off the loan. Besides, it offers the much-needed security of owning your home.
Here are some reasons you must consider while prepaying the loan -
Especially, if it’s being done before retirement it can help you save your regular income or use it elsewhere as you want. The funds now saved can be diverted to other options to invest. As every individual’s risk tolerance varies it is important to plan prepayment based on their expected return of investment, impact of taxes and so on.
Major NBFCs allow prepayment when amount is more than 1 EMI and usually with nil charges. However, this criteria may vary from lender to lender. Therefore, it is advised to discuss loan terms with your Relationship Manager to seek proper guidance on the same.
Prepayment of principal on a floating rate loan represents a low-risk asset but will not be considered a risk-free asset. While, there is still no default risk on prepayment principal on floating loan there is still interest rate risk as the rate could decrease over time.
By prepaying the loan you receive the benefit of overdraft facility by the lender based on your good credit score. This simply means you can avail instant money whenever it is needed even if you have paid off the interest rate on your loan against property.
Additional Read: Prepaying Your Loan Against Property – Good Idea Or Bad
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