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Paying the full outstanding balance of a personal loan before the original loan time period is known as pre-closure. Those looking to improve their financial position and manage their personal loans more effectively will want to know the details surrounding pre-closure of a personal loan which is covered here. Understanding personal loan pre-closure Personal loans are flexible in their intended purpose, however interest charged over the course of the loan can be significant.
Paying off the loan in full prior to the original loan term allows borrowers the opportunity to avoid future interest payments. Depending on the financial institution, a prepayment charge or fee may be assessed in order to pay off the loan early. Benefits of pre-closing a personal loan Potential drawbacks of pre-closing a personal loan Pre-closure procedure The following generally address the steps before pre-closure of a personal loan: Is pre-closing the right choice for you? Personal loan pre-closure is a decision that is dependent on the unique financial situation of the borrower.
Here are some factors to think about: In conclusion, a financial advisor can give advice that is tailored to you and can help you through the pre-closure of a loan and decide what is best for your financial situation. Always remember that personal loans carry higher interest rates and can lead you to enter into a debt trap. Disclaimer : Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply.
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