Prepayment Vs Part Payment
In-case you receive some surplus cash in the form of bonus or gift, you can consider making a prepayment or part payment. Let’s understand these options in details:
You can choose to pay the loan back in full. If this is done early into the tenure of the loan, it can save you a lot of interest. However, most personal loans have a lock-in period (usually 1-year) only after which the prepayment can be done.
Some lenders allow part prepayment of personal loans where you can pay at least 3 EMIs at one go. This can help you to decrease the loan EMI or tenure. However, a part prepayment may attract some part payment charges, which can vary from one lender to another. Therefore, check the charges before considering making the part prepayment.
Effect of full or part prepayment on the credit rating
While part prepayment may not have much effect on your credit rating, full prepayment does have a positive effect on your credit rating. However, part prepayment does reduce your loan burden, and hence, is definitely a good idea.