Lump sum prepayment reduces more interest outgo

Published: October 29, 2019 12:03:47 AM

Maximum tenure of an auto loan is seven years. Ask for prepayment charges and period in which prepayment is not allowed, before availing the loan.

 The balance loan outstanding amount needs to be paid by you. The balance loan outstanding amount needs to be paid by you.

By Chaitali Dutta

I want to prepay some part of my home loan. Should I pay in one go or stagger it in a few instalments?
– Rohit Juneja
If you have the money ready, from the interest accrual point of view, it is best to pay as a lump sum. Lump sum payment will reduce your interest outgo to a larger extent as compared to the same amount paid over a few months as instalments.

I bought a car in 2017 with a loan. Two months ago, the car got stolen. I have submitted the papers for insurance claims. Do I continue to pay the EMIs?
—Rohit Patankar
Yes, your obligation to pay the debt to the bank does not end with the car getting stolen. The insurance company will pay the settlement amount directly to the bank. The balance loan outstanding amount needs to be paid by you. Continue paying the EMI to keep your credit history intact.

My daughter used to pay the EMI for her education loan. Now she is getting married and I do not want her in-laws to know about the loan. Can I pay the remaining EMI on her behalf?
—Gayatri Madan
Yes, as a parent you may pay partly or fully the loan outstanding in the education loan availed for your child.

Can I get a pre-approval for a loan as I am yet to finalise the property?
—S Narasimhan
Yes. It is a common practice to get a pre-approval on your home loan. This will ensure that your paperwork is in order and you will have a fair idea about the budget you need to stick to, while looking for the appropriate property for purchase.

I plan to buy a car for Rs 10 lakh. Should I take a three-year or five-year loan?
—Bhaskar Shukla
Maximum tenure of an auto loan is seven years. Ask for prepayment charges and period in which prepayment is not allowed, before availing the loan. Then go for a longer term loan with flexibility to pay off earlier, as and when you have extra funds. This way your EMI will be lower.

Is there any limit on education loan for studying abroad?
—Ashok Bakshi
Most scheduled banks will give a loan of Rs 20-50 lakh for study abroad. Axis Bank does not have an upper limit. A few NBFCs (Avanse, Credila) specialise in education loans and do not have amaximum limit, provided other criterions are met.

The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your queries to  fepersonalfinance@expressindia.com

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