Most people tend to take a home loan for 15 to 20 years as this usually offers the lowest home loan interest rates. Now to prepay the loan, you have to pay in Equated Monthly Installments (EMI) for the scheduled duration. However, if you wish to save on the interest, then pre closing your loan is a great option. So what does this mean? In simple words, it is to repay the entire remaining loan amount in one single payment. Once this is done, your property will then be debt-free! Now a days you can apply online for a home loan and get it easily. However, the process of pre-closure is not that simple. This article will help you understand important terminologies and some smart ways to close your home loan correctly, so that you won’t face any problems in the future.
Important Terminology- The No Objection Certificate (NO) is given to you by the financial institution, and it states that the lender does not have any more interest in the property.
– A lien is a transaction that was registered in the Registrar’s office when you had taken the home loan. This document prevents you from having the freedom to sell your property. The lender insists on this document only if they doubt the borrower’s credibility.
- Credit Information Bureau (India) Limited (CIBIL) keeps a record of your payments pertaining to credit cards and loans. The higher your score, the easier it will become for you to secure loans in the future.
– Encumbrance certificate (EC) is a written record of each and every financial transactions that have been performed on your house.
Procedure to Pre-close a Home Loan
The following steps will show you how to pre close a home loan.
1. If you have decided to pre close a home loan, then you have to inform the financial firm in writing. Mention the date by which you wish to make the payment. Request the lender to inform you of the outstanding amount, including the interest. Bajaj Finserv provides an online Home Loan Foreclosure calculator so that you can do your own calculations as well.
2. Once the company responds, you can make your prepayment.
3. It is now the lender’s responsibility to give back all the original documents that you had submitted when taking the loan. Before signing on the acknowledgement, make sure that you have received everything.
4. The company will now issue a No Objection Certificate to you.
5. In case a lien had been created, you and a bank official will have to go to the Registrar’s office together and have it terminated.
6. Now apply for a new Encumbrance Certificate at the Registrar’s Office. The updated EC should reflect that your loan has been completely repaid.
7. Many a time, lenders don’t inform CIBIL of your prepayment. If this happens with you, contact the financial firm and get your score updated.
These seven steps are critical in completing your home loan prepayment procedure. Make sure you follow them correctly!
Here Are some Tips to Pre Close a Home Loan!
1. Many banks charge a penalty for prepayment. When you take a home loan, read the terms and conditions carefully so that you choose the right borrower! With a trusted company like Bajaj Finserv, you can enjoy Zero Foreclosure Charges.
2. When taking a loan, ask the lender for an acknowledgement of all the documents that you have submitted. At the time of repayment, this will help you to figure out if there are any missing documents. Even better, you Access your Documents Online through the Bajaj Finserv customer portal.