Prepayment or part payment can save you a lot of money in terms of interest you need to pay to the Money Lender. However, most money lenders allow part payment or prepayment/preclosure but there are some restrictions to it. Like, they set a specific time/period that you need to pass before prepayment or preclosure of a loan.
What is the advantage of full prepayment?
The best thing about prepayment your loan in full is that it can save you a lot of money on the interest. The more early you pay into the tenure of the loan the more you can save. But generally in a personal loan, you have to pass a time of one year before you can repay the total outstanding amount.
However, you can take advantage of prepayment and save your money but some banks charge you a penalty of 3-5% on prepayment/preclosure. Which is not a good thing to do. But if you had extra cash and don’t know any better use for it, just pay off your debt and be free.
What is the advantage of part payment?
If you pay a lump sum amount of money which is not equivalent to the total outstanding amount of your loan it is known as part payment. Part payment may not immediately finalize your loan but it helps in decreasing the total amount due which brings down your EMIs and the total amount you pay. But part payment is only effective if you pay a decent amount of money as part payment.
There is also another advantage of part payment is that you can pay as many part payments as you want but keep in mind you must pay a significant amount of lump sum money to make it work. Also, many banks don’t allow part payments on personal loans.
What are the effects of prepayment and part payment on your credit score?
The part payment may help you to finalize your loan within stated tenure but it does not affect your credit score. In the case of prepayment, the effect will not show immediately but for sure it will increase your credit rating pretty much.
In case of personal loans, it is better to pay off your loan as soon as possible because of their high-interest rates you pay plenty of money for no reason. If you wanted to apply for a quick loan just search for Loan Singapore and go to cash lender.sg.