Banks and NBFCs are out to entice potential lenders. They market their interest rates and other fees to lure potential borrowers to their loan offers. The borrowers are also constantly seeking to obtain credit for various reasons. Credit cards, personal loans, mortgages, home loans, auto loans, educational loans, and many more loan options are offered to borrowers to help meet their financial requirements.
There are many ways to repay loans too. Although most loans are for monthly EMI repayment, gold loans provide an immediate refund. Credit cards offer the option of revolving credit available at any time you like and paying back, with no interest, in just 50 days. Therefore, borrowers can quickly repay their loans without stressing about defaults or late payments.
Then “Loan Repayment Options are an essential aspect to consider when applying for a loan.
What are the main factors to consider when it comes to loan repayment options? What should I be looking for when I try to repay the loan? CreditMantri offers a few things to look for when repaying the loan.
Foreclosure Charges:
This is a crucial aspect that you must confirm with your bank before obtaining loans. By the most recent guidelines issued by RBI, banks cannot charge foreclosure fees for loans with a floating interest rate. It is, therefore, essential to verify the loan’s interest rate before obtaining it. Personal loans typically have fixed rates of interest, whereas credit cards and home loans are based on a floating interest rate. Foreclosure fees can range between 2% and 5% of the total outstanding. If you attempt to pre-close your loan early within the tenure of your loan,
Lien on collateral:
Most lenders place an obligation on the collateral you have submitted for a loan. For instance, in the case of a car loan, the car you bought is a hypothecated loan in the name of the lender until the loan amount is paid back. These liens are put on the collateral to safeguard against the loss resulting from bad loans. Most people need to realize that it can be legally enforceable by the banker (or anyone else) to take over the collateral property of the borrower should there be non-payment of the loan amount. The lien is reflected on your credit report, too. Therefore, once you have paid off the loan, make sure that you remove the lien from your collateral. Be sure to request a NOC (No Objection Certificate) from the lender to release the lien to ensure you can dispose of the assets.
The impact on your score on credit
Lenders utilize the credit score to assess the creditworthiness of prospective applicants. A poor credit score could be considered a red signal for lenders. Making your loan payments on time is a great beginning to improve your credit rating. This is why establishing ECS or a standing instruction to create your month-long EMI payments is simpler. This helps ensure that your repayments for loans are made on time. Additionally, if you make additional payments to your account for loans, your credit score will also increase. Failure to repay a loan in time can negatively impact your credit score and affect your chances of getting credit in the future.
Original documents must be obtained:
To get the loan, you must have provided a handful of documents, including the deed of sale to your home or asset document, bonds, and securities, for instance. When you have paid back the loan, receive your original paperwork from the lender. Also, obtain the most recent “Encumbrance Certificate that outlines the closing of your loan and legal rights that have been transferred to you. This is crucial to prove your rights over the property, asset, or collateral.
The repayment options for the loan:
What are the choices offered by the bank for repaying the loan? Does the bank accept the NACH mandate or prefer cash-only payments? Can you pay quickly online, or must you visit the branch monthly to make payments? Given our busy schedules, the most convenient payment options should be readily available to manage the loan quickly.
Is Early Loan Repayment A Good Idea?
We offer loans to cover large-ticket costs or to make fast payments. The fact that you can get a loan doesn’t mean you need more funds to repay the loan in full. Therefore, You can pay back the loan entirely in time or make partial payments right now and close the loan before the expiry date.
- Paying off your loan sooner will save you a lot of money for interest and other fees.
- It can boost your credit score because you have a strong credit history and repayment record in your relationship with the lender.
- Additional funds to reinvest into your company or make investments in new ventures.
- The chances of receiving better loans are more significant if you pay your loan sooner.
- The appreciation of assets leads to higher returns.
Conclusion:
A loan could be considered an investment if you pay the loan in full before the date you have set for repayment. Education loans and home loans may even give you tax benefits from the interest portion. If you don’t pay back the loan in time or not paying on time can cause harm to your financial well-being. Your credit score could be impacted negatively and limit your chances of getting low-interest loans shortly. Therefore, consider the possibility of repaying your loan before the duration of the loan to get better advantages.
