Personal loan Pre Closure: Of all the loans, taking a personal loan is considered the easiest. In this era of inflation, most people have to resort to loans to buy their favorite things. In a way, we can buy any expensive thing in installments through a loan. However, in a loan, you have to pay interest along with the principal amount.
What is pre-closure?
Everyone wants their loan to be over as soon as possible. But if you go to repay the loan before time, then you have to face pre-closure. Before understanding its advantages and disadvantages, let us know what pre-closure is. When we repay our entire loan before the scheduled time, it is called pre-closure. This is better only when there are sufficient funds to repay the loan. Pre-closure reduces your interest rate. Because the longer the loan, the more interest you will have to pay. Although this causes a loss to the banks, your credit score also improves, making it easier for you to get a loan in the future.
Do you know the benefits of taking pre-closure?
1. Choosing the pre-closure option reduces the interest rate on the loan.
2. Because you are able to repay the loan before time, it strengthens your credit score.
3. If you have a good credit score, your chances of getting a loan easily in the future also increases.
4. Now there will be no burden of EMI. Due to which the financial condition will improve further.
Disadvantages of pre-closure
1. Along with the advantages of pre-closure, it also has some disadvantages.
2. Some banks and financial institutions charge a fee of 2 to 6 per cent for taking pre-closure.
3. Due to which the benefit received on completion of interest and EMI is reduced.
4. On the other hand, if you do not have sufficient funds or the repaid funds have been withdrawn from savings, then you may face difficulty in facing future emergencies.