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Is pre-closing your personal loan a smart move? Pros and cons explained


Published on 2025-03-21 10:01:12 - Mint
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  • Pre-closing a personal loan can save interest and improve credit scores, but it may involve pre-closure charges, liquidity issues, and opportunity costs. New RBI guidelines on floating-rate loan prepayment charges may offer relief going ahead.

The article from MSN discusses the considerations of pre-closing a personal loan, detailing both the advantages and disadvantages. Pros include saving on interest payments since you stop the interest from accruing on the remaining loan amount, improving your credit score by reducing your debt-to-income ratio, and gaining financial freedom by eliminating monthly loan payments. However, cons involve potential prepayment penalties or fees which could offset some of the savings, the opportunity cost of using the money to pay off the loan instead of investing it elsewhere, and the loss of tax benefits if the loan was for a purpose that allowed for tax deductions. The article advises weighing these factors against one's financial situation, future income stability, and investment opportunities before deciding to pre-close a personal loan.

Read the Full Mint Article at:
[ https://www.msn.com/en-in/money/news/is-pre-closing-your-personal-loan-a-smart-move-pros-and-cons-explained/ar-AA1BnEiQ ]
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