What is Loan Foreclosure?
Loan foreclosure refers to prepayment of the pending loan amount in full before the end of the repayment tenor. When you foreclose your Loan Against Property, it means that you have no more pending dues with the lender and can be declared debt-free in the loan statement. When you choose to foreclose your Loan Against Property, here are the benefits you gain:
- By foreclosing your loan earlier, you save the interest that would otherwise accumulate through the course of the remaining repayment tenor.
- You can enjoy a freer repayment bandwidth and take on other investments of loans, to serve financial goals.
You can use a mortgage loan foreclosure calculator to help exact the amount you have to pay if you want to foreclose your ongoing Loan Against Property. These projections can help you prepare in advance and arrange for the funds if you are keen on foreclosing your loan.
How Can You Ensure a Successful Loan Against Property Foreclosure?
Here are a couple of things you should bear in mind before you consider foreclosing your Loan Against Property for good.
- Tax Implications: While Loans Against Property aren’t eligible for too many tax exemptions, one can still qualify if the end-use of the loan sanction is to buy a property. When you foreclose your ongoing loan, consider what you may lose out on in terms of tax concessions.
- Financial Implications: Before you initiate the Loan Against Property foreclosure, ensure that you have the funds handy, depending on the amount you have to pay to foreclose the loan. If you are falling short, consider deferring the plan till the time you can arrange for the funds.
- Foreclosure Penalties: Consider all the costs involved in foreclosing your ongoing Loan Against Property. Individual borrowers who are servicing a floating interest rate loan can foreclose their loans without any additional costs. However, if you fall outside this bracket, you may have to bear an additional foreclosure penalty.
Frequently Asked Questions
Before applying for a loan foreclosure, here are the factors to consider:
- Adequate cash supply
- Current tax concessions
- Additional charges, such as foreclosure penalties
The act of foreclosing a Loan Against Property means that you pay the outstanding loan amount in one go before the end of the repayment tenor. If your tenor was previously 18 years, and you foreclose your loan in the 10th year itself, you save the interest that would have accumulated through the other 8 years.
The foreclosure month is the same month in which you repay the entire Loan Against Property balance to the lender before the end of your repayment tenor.
There are no penalties or additional costs attached to Loan Against Property foreclosure for individual borrowers with floating interest rates.
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