To Apply and Manage
your Home Loan.
Download our Mobile App
Indiabulls Home Loans
Apply
Online

India's 1st Completely Online Home Loan!

  • e-APPLY

  • e-SANCTION

  • `

    e-DISBURSE

Start your eHome Loans Process Now!

Apply Online
OR

Download our Mobile App

Enter Mobile Number to get app on your phone

+91
GET A
CALL NOW

Fill in the details below

  • Generate OTP

Quick Facts about Pre-Payment Charges

Quick Facts about Pre-Payment Charges
 

A Pre-payment charge or a Pre-payment penalty is a clause in a mortgage contract stating that if the mortgage is prepaid within a certain time period, the borrower will be charged a penalty by the lender. The penalty amount is usually a percent of the outstanding mortgage amount or 3 months of interest, which varies from bank to bank. Why banks charge Pre-payment penalties? When borrowers repay the outstanding sum all at one go, the bank lose out on the interest it would have earned from the borrower, had the borrower paid the home loan EMI’s over a longer tenure. To compensate for this reduction in revenue, banks levy a Pre-payment penalty on the borrower. Why do borrowers pay the outstanding loan amount before maturity?  The market interest rates fluctuate every now and then. Many borrowers who have opted for a fixed interest loan will want to refinance their loan, incase the interest rates fall. They usually transfer their loan to another bank offering a lesser rate of interest. The money is transferred from the new bank to the existing bank. The existing bank then levies a Pre-payment penalty on the borrower for the interest lost. The RBI has banned the banks to levy any penalty on individual borrowers for Pre-paying floating loans. Now, some banks are phasing out of the Pre-payment penalty to attract customers. Related Articles:

The post Quick Facts about Pre-Payment Charges appeared first on Indiabulls home loans.

Related Article
Types of Home Loan Charges

Types of Home Loan Charges

Most people fulfil their wish of becoming homeowners by taking out a home loan. It is the easiest way to afford a property as one can pay for the house in monthly instalments.

MCLR in Home Loan

MCLR in Home Loan

The interest rate is one of the most important components of a loan, especially in the case of a high-value loan that lasts for 2 decades or more; the home loan.

Home Loan Terminology

Home Loan Terminology

Each one of us, at some or the other point in life, dreams of becoming a homeowner. Having a house to call our own is the surest way of being financially secure.

Share your comments on the article
0 / 3000
Read all comments

No Comments