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Paying off your personal loan before the tenure ends might sound like the smartest financial move—but is it always the right one?
Prepayment, also known as early loan repayment, refers to settling your outstanding loan balance before the scheduled tenure. It can help reduce interest outgo, free up future cash flow, and offer peace of mind. But there’s more to it than just saving on interest. From prepayment penalties to impact on credit score, several factors can influence whether early repayment actually benefits you.
And here's the good news—if you're using a modern, digital-first lending solution like FIRSTmoney by IDFC FIRST Bank, prepayment becomes not just faster, but also smarter. So, before you go ahead and clear your dues, let's go through everything you need to know about loan prepayments.
Prepayment allows you to repay your personal loan—either in part or in full—before the scheduled tenure ends. It’s a financial decision that can reduce your interest burden, even help you become debt-free earlier than planned. Here's how it typically works:
Full prepayment, also known as foreclosure, involves repaying the entire outstanding loan amount in one shot before the end of the loan term. This permanently closes your loan account and saves you a significant amount on interest.
Partial prepayment means paying a lump sum amount over and above your regular EMIs. This amount is directly adjusted against the principal, reducing your overall interest liability. Depending on your loan policy, it can either shorten your loan tenure or reduce your EMI.
Although often confused, the two terms are distinct:
Understanding this difference can help you choose the right strategy to manage your loan efficiently.
Before you prepay your personal loan, lenders typically set a few conditions that you must meet. These ensure that the loan tenure is substantial enough for them to recover part of the interest before allowing early repayment. Here are some common eligibility norms:
Always read your loan agreement carefully or connect with your lender to confirm whether you're eligible to prepay and what conditions apply.
While prepaying your personal loan might seem like a financially responsible move, it isn’t always the best option in every situation. Here are a few drawbacks to consider:
Thus, prepayment has its place, but it’s not always the most efficient financial decision. That's where IDFC FIRST Bank’s FIRSTmoney offers a smarter way to manage personal loan funds, giving you the flexibility to borrow and repay on your terms without penalties.
Here’s why FIRSTmoney is a smart choice when you need a personal loan -
FIRSTmoney comes with zero foreclosure charges. You can choose to repay the loan in full prior to your repayment schedule ending without incurring any additional charges.
You can get a FIRSTmoney loan of up to ₹10 lakhs to take care of any personal or professional needs, at competitive interest rates starting at just 9.99%!
With FIRSTmoney, you can conveniently opt for multiple on-demand loans from your loan offer without having to apply for a new loan application every time.
With FIRSTmoney, you can comfortably choose a suitable repayment tenure from 9 months to 60 months. This flexibility lets you can choose your EMI payments as per your budget, which helps avoid any financial hassles with repayment.
To apply for a FIRSTmoney loan, all you need is your Aadhaar card number and display your PAN card during the video KYC process. The entire loan procedure is digital, giving you immediate access to funds to take care of any urgent financial needs.
Timely repayment or foreclosure reflects positively on your credit report. FIRSTmoney’s flexible structure encourages responsible borrowing, which can boost your creditworthiness over time.
Here’s how you can apply for a FIRSTmoney smart loan in 5 easy steps:
Opting for FIRSTmoney with no foreclosure charges offers a cost-effective borrowing experience along with flexible EMI repayment plans. With FIRSTmoney’s quick approval process, competitive interest rates, and borrower-friendly features, this smart borrowing option stands out among its counterparts in the market.
Why wait? Apply for a FIRSTmoney loan today to tackle any of your financial needs quickly and efficiently.
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.