One of the most availed financial tools that many individuals utilize in the current times is a personal loan. Whether you need the amount for your home refurbishment, managing unexpected expenses, consolidating any ongoing debt, or going on a vacation, this type of loan helps you manage your finances efficiently.
We at Stashfin believe in empowering all our potential customers with knowledge so they can make well-informed and wise decisions about their loans. Long gone are the days when people actually had to travel to financial institutions in order to avail such facilities. However, today, in this comprehensive guide, we’ll delve into the intricacies of loan closure and part payments.
Understanding Personal Loan’s Closure: What exactly is it?
As the term implies, it refers to the process of settling and repaying an instant personal loan in full, bringing the borrowing arrangement to a total close. This enables the borrower to satisfy the entire outstanding amount of the loan, including the principal amount and any accrued interest/fees.
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Standard Closure
This method involves fulfilling the loan agreement by paying all the EMIs (Equated Monthly Installments) and interest according to the original terms and conditions until the loan amount is fully repaid.
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Pre-Closure
Pre-closure or early payment occurs when the borrower opts to repay the loan before the scheduled end date as per the personal loan policy. When an individual follows this procedure, they save on the interest amount they would otherwise accrue. It’s quite a favourable choice for those with surplus funds aiming to close their loan earlier.
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Partial Repayment
Part prepayment involves repaying just a portion of the loan principal without fully closing the loan. This kind of approach helps in reducing the tenure of the loan and overall interest paid.
What are its advantages?
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Savings on interest
Closing an ongoing loan early or making its part payments leads to reduced outstanding principal. This, in turn, lowers the total interest payable over the loan term. By decreasing the principal amount, borrowers can effectively minimize the interest burden, saving significant amounts in the long run.
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Credit Score Improvement
Timely closure or consistent part payments reflect positively on the credit history of the borrower. When you tend to successfully pay off the loan, it clearly demonstrates financial responsibility and discipline, ultimately boosting the credit score. Now, it is a well-known fact that a higher score can facilitate easier access to credit and better terms for future loans or financial products.
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Financial Flexibility
When you close a personal loan, you are free from the ongoing personal loan in EMI obligations. This also leads to freeing up finances for other investments, expenses, or savings goals. This newfound financial flexibility enables one to allocate funds towards other essential needs or savings, contributing to a more secure and stable financial future.
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Reduced Financial Stress
Closing a loan or consistently making part payments cuts down all the financial stress associated with debt. The knowledge that the loan is gradually decreasing or nearing closure provides a sense of financial security. Reduced debt burden translates to improved mental well-being, allowing individuals to focus on other financial goals or investments.
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Accelerate Financial Goals
Paying off a personal loan faster or reducing the balance simply by part payments can pace progress toward other essential financial goals. It frees up your monthly income, allowing you to allocate funds toward savings via a proper channel.
Conclusion
All-in-all, successfully closing an instant personal loan online is associated with various benefits, including a potential boost to the credit score, reducing burden, increased financial stability, and freedom.
Get in touch with us to start your financial freedom journey!
