Most lending institutions offer the option of making early payments on a loan. A borrower may sometimes have a surge of cash flow due to the sale of an asset or a receipt of yearly bonus. They may, therefore, wish to pay off their loan with the excess cash.
Following are the two options of making an advanced payment.
1. Part prepayment
A part prepayment refers to a partial amount being paid off before the stipulated tenure. By doing so, the outstanding loan amount gets reduced significantly. This results in lower interest outgo, thus leading to lower Equated Monthly Installments (EMIs).
2. Prepayment of entire outstanding amount
Borrowers also have the option of paying off the entire outstanding loan amount. However, it is important to note that there is a prepayment penalty that is charged. Therefore, opt for such an option only if your savings offsets the cost associated with the advanced payment.
The process of prepayment of Tata Capital personal loans is quite simple. Borrowers may visit the Tata Capital branch or may call on the telephone number 18002096060. If they do not wish to make a visit to the branch, the representative will visit their residence and collect the necessary documents.
The documents that have to be submitted for loan prepayment are as follows.
1. Request letter
The borrower has to submit a request letter stating that he wishes to prepay the loan, either in part or the entire amount. The request letter has to be signed by the loan applicant.
2. PAN Card
The borrower has to also submit his Permanent Account Number (PAN) card. This is required as a proof identity of the borrower.
3. Statement of last EMI clearance
It is necessary to submit a statement that mentions the clearance of the last EMI. Prepayment of loans may be done only if all the previous outstanding installments have been paid off.
4. Foreclosure statement
The last document to be submitted for prepayment of loan is the foreclosure statement. It is required to know the outstanding amount for the closure of the loan and the applicable charges.
After the submission of these documents, Tata Capital will accept the amount through cheque, demand draft (DD) or cash. The paid amount will then be deducted from the borrower’s outstanding loan amount.
A major benefit of advance payment on Tata Capital loans is that there is no charge if part prepayment is made 180 days after borrowing the loan. If borrowers wish to prepay the loan within 180 days of loan disbursal, they are able to prepay up to 25% of the outstanding amount. However, if the prepayment amount is more than 25% of the outstanding amount, a 2% charge is levied as prepayment fee.
It is important to assess if making advanced payment is a feasible and profitable option. If the borrower’s savings through lower interest are greater than the penalty, they he / she may go ahead with the decision to prepay. Generally, the advanced payment offsets the benefits received. Therefore, individuals must take all factors into consideration so as to make a sound financial decision.
