A personal loan is an amount disbursed by a lender, usually a financial institution, to a borrower. The amount provided through a personal loan can be used for any reason, be it personal, entrepreneurial, commercial or medical. As simple as the idea of a personal loan may seem, a number of people are unable to clearly comprehend the plethora of financial jargons used by banks. It is highly advisable, therefore, to fully understand the meaning of the following important elements before you request for a personal loan.
’Tenure’ is the total period for which the personal loan amount is dispensed. This period begins from the date of disbursement. It reaches completion either on the date of closure of the loan, or on the date on which the last EMI payment is to be made, whichever comes first. Obtaining a personal loan from IndusInd Bank provides you with a tenure option of 1- 5 years.
The maturity of your personal loan occurs on a particular date given by the lending bank. This date signifies that the principal amount of your loan is due and needs to be repaid to the lender in full. At this point, the remaining interest is also to be paid off, thereby disabling further EMI payments.
Customers, when possible, can elect to repay the full loan prior to the maturity date. This is known as Pre-Payment. Pre-payment allows you to save on the interest of the remaining EMIs. However, most banks require a certain number of instalments to be made before pre-payment is applicable. They may also charge a penalty for pre-payment as they incur a loss on the interest.
Part-Payment is similar to pre-payment as it allows you to repay the loan ahead of maturity. The difference is that part-payment is a partial amount of the principal. It can be cleared when you have an available lump-sum that can be used towards paying off the personal loan. Part-payment further helps in reducing the remaining principal amount, thereby the EMI amount and its respective interest.
Balance Transfer involves requesting another bank to provide you with another personal loan. The amount of the new loan will equal the outstanding amount of your first one. Through this method, you receive the benefit of being a new customer to the said bank, and as a result, are offered lower EMIs and interest rates as compared to those of the previous lender.