What’s the Process of Prepayment of ICICI Bank Personal loan ?

A Personal Loan is the sole loan that typically has a higher interest rate than the other loans, which can increase your Equated Monthly Instalment (EMI) burden. As a result, some people, if they can afford to do so, decide to pay off their ICICI Personal Loan before the loan term finishes. This is referred to as prepayment or loan foreclosure. 

In the long term, you save money by reducing your EMIs and the interest you pay on the principal amount. Before you decide to pre-close it, you must first obtain authorization from the bank, and in some situations, banks may levy foreclosure penalties if you pay the loan off before the agreed-upon term. To compensate for the interest loss, the bank imposes a penalty.

Important Considerations to be kept in mind before prepaying a loan 

While the loan prepayment can prove to be profitable for the applicant, there are a few things that every borrower should be aware of.

• Prepayment lock-in term: Most banks have a prepayment lock-in period of one to three years during which you are not allowed to pay off the loan. According to RBI norms, floating-rate loans, on the other hand, have no lock-ins. ICICI Personal loans have a prepayment period of 12 months. After the payment of 12 initial month’s EMI’s, you are allowed to make loan prepayment anytime. 
• Prepayment penalty: If you pay off your loan before the lock-in period ends, you may be assessed a penalty (for non-floating rate loans and business loans). Check to see if the penalty will outweigh the interest savings. This is because banks will also compensate for their loss, which will be in the form of fines. 
• The interest component of the loan is computed using the declining balance approach by the majority of institutions. This indicates that the interest component is higher at first and falls as the loan term decreases. A loan prepayment calculator can help you figure out how much interest you’ll save if you stick to a prepayment schedule.

Advantages of Prepayment of Loan 

Let’s have a look at some of the advantages of loan prepayment now that you understand how it works. 

• Prepayments are applied to the principal rather than the interest on the loan.
• Prepaying your loans can help you consolidate them.
• Interest savings are significant. The more you prepay, the more you will save your hard-earned money.
• Prepayment is described as making partial payments on a loan in order to lower the debt. Prepaying your loan lowers your outstanding debt and lowers the amount of interest you pay. Prepayment penalties typically range from 2% to 4% of the outstanding loan balance. Prepayment of a loan is also subject to various restrictions and regulations. To avoid any misunderstandings, you should read all of the terms and conditions.

ICICI Personal Loan Prepayment fees and charges

• Annual interest rates for ICICI bank Personal Loans range from 10.5 percent to 19 percent. Loan processing and origination costs of up to 2.50 percent of the loan amount, as well as GST, may be charged.
• Furthermore, if you are a salaried customer and intend to pay off the rest of your loan, you will be charged a Prepayment Charge of 5% + GST on the outstanding principle by ICICI Bank.
• If you pay off the loan with your own money, there are no costs.
• Late payments are subject to a 24 percent annual interest rate.
• Each transaction’s Repayment Method Swap fees are fixed at INR 500 + GST.
• There are expenses of INR 3000/- including GST for loan cancellation EMI. Every cheque bounce incurs a fee of INR 400 plus GST.

The Bottom Line

Prepayment is profitable if you want to save your money. For prepaying the ICICI personal loan amount, you need to visit the branch and fill the prepayment application form. Remember to be aware of all the terms, conditions and charges related to the prepayment of loan to avoid any discrepancy in the future. After your prepayment request gets processed, you can make the payment. Also, be aware of the ICICI bank personal loan interest rate to know your resulting EMI after prepayment.