Want to understand the loan force-closure (pre-payment of loan) and its implication on the remaining EMI

[CardTox]

Friends, I want to understand how does the 'force-closure' or pre-payment of a personal loan work in real life. Suppose the situation is as follows:
1. I took a personal loan for the amount of 1,00,000 (1 Lakh) for 12 months.
2. The every month EMI of this PL is near about Rs. 9,000.
3. I have an option to pre-close this loan after initial 3 EMIs. Suppose I am wanting to force close this loan after paying 5 EMI.
4. In 5 EMIs i already paid, Rs. 45,000 to the concerned bank. Total outstanding amount is Rs. 55,000. (100,000 - 45,000)
5. Now I want to understand do i have to pay 3% closure charges of 55,000 or 63,000 (108,000 - 45,000 )
6. . If i continuously pay 11 EMI, i would have paid 99,000. Then I decide to fully repay the loan, in that situation what will be my force-closure charges?

 

[2025]

Friends, I want to understand how does the 'force-closure' or pre-payment of a personal loan work in real life. Suppose the situation is as follows:
1. I took a personal loan for the amount of 1,00,000 (1 Lakh) for 12 months.
2. The every month EMI of this PL is near about Rs. 9,000.
3. I have an option to pre-close this loan after initial 3 EMIs. Suppose I am wanting to force close this loan after paying 5 EMI.
4. In 5 EMIs i already paid, Rs. 45,000 to the concerned bank. Total outstanding amount is Rs. 55,000. (100,000 - 45,000)
5. Now I want to understand do i have to pay 3% closure charges of 55,000 or 63,000 (108,000 - 45,000 )
6. . If i continuously pay 11 EMI, i would have paid 99,000. Then I decide to fully repay the loan, in that situation what will be my force-closure charges?

3% of the principal outstanding on the prepayment date. Amount will be somewhere between 55,000 and 63,000, as per ur example.
+add outstanding interest since last EMI payment.

 

[CardTox]

3% of the principal outstanding on the prepayment date. Amount will be somewhere between 55,000 and 63,000, as per ur example.
+add outstanding interest since last EMI payment.

Suppose I paid 11 EMI, the outstanding amount will only be 1,000. In this case I can close by paying only 3% of remaining principle? Will it not create an issue for the bank in case of longterm loan?

 

[Avatar Aang]

After 5EMI you would have repaid less than 45K(principal). See the attached image. I have considered 1L loan for 1Year with 12% interest rate.

Change your calculations accordingly

 

[2025]

Suppose I paid 11 EMI, the outstanding amount will only be 1,000. In this case I can close by paying only 3% of remaining principle? Will it not create an issue for the bank in case of longterm loan?

No. As per your example after 11EMI your outstanding principal will be around 8700 not 1000.

After you take a loan they will provide amortization schedule. That will help you further.

Check the above example given by 'avatar Aang' to understand how principal outstanding and interest amount changes with time.

 

[Raghav2006]

I also had a query regarding the same.
If my personal loan tenure is 4 and 3 yrs are remaining and I do considerable pre payment say 50% then would it reduce my emi or tenure?

2ndly, if there is any banker in this forum they will be able to help me better.
I want to take a personal loan but started working only a month ago, so I've got only a month worth of Salary credit and no cibil or itr.
Is it possible for me to get personal loan of around 10-12× of my monthly credit considering my sibling (with good income source and itr and score) is ready to guarantee my loan.

My this guarantor sibling can easily get this much loan but I don't want them to take it hence, looking for above option.

Please help me in this regard.
Thanks.

 

[2025]

I also had a query regarding the same.
If my personal loan tenure is 4 and 3 yrs are remaining and I do considerable pre payment say 50% then would it reduce my emi or tenure?

2ndly, if there is any banker in this forum they will be able to help me better.
I want to take a personal loan but started working only a month ago, so I've got only a month worth of Salary credit and no cibil or itr.
Is it possible for me to get personal loan of around 10-12× of my monthly credit considering my sibling (with good income source and itr and score) is ready to guarantee my loan.

My this guarantor sibling can easily get this much loan but I don't want them to take it hence, looking for above option.

Please help me in this regard.
Thanks.

1. Tenure. Unless u tell them to adjust emi amount.
2. I m not a banker. My opinion: Approach your bank where salary credited. Nowadays Guarantee won't be enough for such high unsecured loans with no track record or service history. Ask ur sibling to become a co borrower.
- If u r a permanent government employee then u can get after verification without help.
- Also approach hdfc and ICICI Bank (physically, not online). Also bear in mind physical application through branch/ loan department usually has higher interest rate.

 

[Raghav2006]

1. Tenure. Unless u tell them to adjust emi amount.
2. I m not a banker. My opinion: Approach your bank where salary credited. Nowadays Guarantee won't be enough for such high unsecured loans with no track record or service history. Ask ur sibling to become a co borrower.
- If u r a permanent government employee then u can get after verification without help.
- Also approach hdfc and ICICI Bank (physically, not online). Also bear in mind physical application through branch/ loan department usually has higher interest rate.

1. Understood.
2. Completed education around 6 months ago, Salary account opened in ICICI in December itself but only 1 salary credited yet that too in old Kotak account.
I am a corporate employee and other sibling who can guarantee is also in corporate but been working for quite some time and has good history, top grade employer and good income, but I don't want the loan to be reflected in their credit report (They will be aware of my loan and that they're guarantor and are completely fine with it and will comply with bank).

Will this do? My sibling (mentioned above) has a PL @ just 10.5% from HDFC and can get more at minimum rate but I want myself to take it and not them. I am ok with a little high rate say 11-11.25% but not more than that as it will be a waste of money.

 

[2025]

1. Understood.
2. Completed education around 6 months ago, Salary account opened in ICICI in December itself but only 1 salary credited yet that too in old Kotak account.
I am a corporate employee and other sibling who can guarantee is also in corporate but been working for quite some time and has good history, top grade employer and good income, but I don't want the loan to be reflected in their credit report (They will be aware of my loan and that they're guarantor and are completely fine with it and will comply with bank).

Will this do? My sibling (mentioned above) has a PL @ just 10.5% from HDFC and can get more at minimum rate but I want myself to take it and not them. I am ok with a little high rate say 11-11.25% but not more than that as it will be a waste of money.

AFAIK you wont get loan at below 13% interest rate offline. Through online possible. Approach ICICI bank after salary credit. They might offer you something but getting 12x salary credit may be challenging as u r 1st time borrower. That also depends on ur Net Take home salary. Better discuss with branch people, they will help you out. Or wait for their pre-approved offer to trigger after 3-6 months.

 

[Raghav2006]

AFAIK you wont get loan at below 13% interest rate offline. Through online possible. Approach ICICI bank after salary credit. They might offer you something but getting 12x salary credit may be challenging as u r 1st time borrower. That also depends on ur Net Take home salary. Better discuss with branch people, they will help you out. Or wait for their pre-approved offer to trigger after 3-6 months.

I need it right now this week itself.
I am ok with 13% roi as I can negotiate for no foreclosure charges and refinance later or close it within a year as I'll have enough funds.

And in case my sibling becomes a co applicant, my loan will be shown in their credit profile as well right?

And for confirming all this, should I call my sibling's ICICI RM to my place and talk?

 

[2025]

I need it right now this week itself.
I am ok with 13% roi as I can negotiate for no foreclosure charges and refinance later or close it within a year as I'll have enough funds.

And in case my sibling becomes a co applicant, my loan will be shown in their credit profile as well right?

And for confirming all this, should I call my sibling's ICICI RM to my place and talk?

Yes. It will be showing in their Credit Profile as well. But the amount will be deducted from your account only if u apply as 1st applicant and using ur ecs mandate.
I would suggest u to approach his/her RM on call if no clear answer then approach ur home branch. If then again they dont give positive response then only use ur sibling as co-borrower. Next loan onwards u wont face much problem once ur track record established.

 

[Raghav2006]

Yes. It will be showing in their Credit Profile as well. But the amount will be deducted from your account only if u apply as 1st applicant and using ur ecs mandate.
I would suggest u to approach his/her RM on call if no clear answer then approach ur home branch. If then again they dont give positive response then only use ur sibling as co-borrower. Next loan onwards u wont face much problem once ur track record established.

Ok, I understood.

this implies loan will be shown in credit report of both primary and co applicant.
In this case as my sibling alone is able to get loan at lowest roi,should I become the co applicant?
Will it help build my score too?
As you told EMI will be deducted from their account isn't an issue for me, I'll enable auto debit of the same amount to them from my account so that they don't have the burden.

 

[2025]

Ok, I understood.

this implies loan will be shown in credit report of both primary and co applicant.
In this case as my sibling alone is able to get loan at lowest roi,should I become the co applicant?
Will it help build my score too?
As you told EMI will be deducted from their account isn't an issue for me, I'll enable auto debit of the same amount to them from my account so that they don't have the burden.

Yes it will help to build ur credit.
I would suggest u to receive/ deduct money from ur account only. Though it is much easier to link the loan with his/her account. Interest rate will still be lower as it includes his profile as well.
U as the 2nd co-applicant and deduction and payment from his/her account should be exercised as ur last option.

 

[Raghav2006]

Yes it will help to build ur credit.
I would suggest u to receive/ deduct money from ur account only. Though it is much easier to link the loan with his/her account. Interest rate will still be lower as it includes his profile as well.
U as the 2nd co-applicant and deduction and payment from his/her account should be exercised as ur last option.

Understood, thinking of going with bandhan bank their web says roi starts at 9.47%, my sibling will be primary applicant and me co, and nach will be done with my account then.
Sibling has loan from HDFC at 10.75%, might refinance it as well, as I think I negotiated for 0 foreclosure charges.