Personal loan Preclosure ????

Hi Nithya,     Usually  Private Banks are calculating pre-cloasure charges ( for eg :4% ) on the outstanding principal amount .  In this case you will have to pay 400000 (principal outstanding) + preclosure charges     and no need to pay interest.

                                                    I would also like to mention one more thing.If you check the repayment schedule given by the Private Banks you can see that first instalments will usually contain more interest component and less principal component.  In the last Instalments Principal will be much more. You can see this if you check AS-19 Leasing ( FInance Charge (Interest ) and Pricipal).  So if you are preclosing after one year, by that time you have already paid a pretty good sum as interest and you need to pay preclosure charges on the remaining principal amout.

thanks a lot sir :)

It is mostly seen that after a period of 6 months, the banks provide an option to re is an option to close the personal loan account. Making regular payments will help you in maintaining  a good credit rating at the end of it.

In such a scenario, you don't have to pay any interest. You only have to pay the amount outstanding(principal amount) and charges for pre-closing the loan. Some of the banks have a procedure of charging penalty if a loan is pre-closed.

Sometimes, it so happens that individuals plan to close a loan after one - two years of taking the loan. In this case, a certain amount of sum has been paid as interest and there is a requirement to pay the charges for pre-closing the loan account