Now transfer/ pre-pay: Auto loans, Education Loans, Personal Loans and Loan against property!

Updated on November 30, 20182 mins read

RBI has banned pre-payment penalty on all floating rate loans, effective immediately.

This is great news for people who have an outstanding Auto Loans, Education Loans, Loan against property and Personal Loans.

Breaking through Glass doors

Breaking through Glass doors

Image Credit: H.Adam

Until now, if you wanted to pre-pay your loan or transfer it to another bank with lower interest rate, the bank would charge you a penalty under the head of pre-payment/foreclosure. This penalty was as high as 5 – 6% of the total loan amount and stopped people from switching to a lower interest rate (within/ to another bank). Home Loans were an exception to this, as RBI had banned prepayment penalty 2 years ago. Now prepayment penalty has been banned across all types of loans for individual borrowers. This means that people with Auto loans, education loans, Loan against property and personal loan can now save by switching to a lower interest rate! However, this is applicable only on floating rate loans from commercial banks. This does not apply on;

  • All fixed rate loans
  • Loans from NBFCs
  • Loans taken by small businesses

Since the banks will take a while to update their software systems, do expect some time before the benefits actually become available to you. In all, this is great news for lakhs of Indians who will benefit from this decision. We have repeatedly received requests for switching services for Education loans, Auto loans and loan against property. We will start these services soon. Do send in your suggestions and comments. Meanwhile, use the calculator below to see how much you can save on your home loan by switching to a lower interest rate.


Aditya Mishra

Aditya Mishra

Aditya has a Post Graduate Diploma in Finance and strategy from IIM Bangalore. He comes with rich experience in the field of strategic investments, venture capital and technology. During his nearly 7 year stint at TCS, Aditya gained deep experience in start ups and exploring new technologies and business models. As director innovation partner Network, Aditya identified start ups with innovative technologies and incubated them to maturity. Aditya's deep understanding of upcoming ubiqutous computing trends helped TCS make strategic investment decisions in this area. As head of sales West India, Aditya spear headed new collaborations for TCS in the banking and financial services space. With a zest for start ups and new innovations, Aditya co-founded Headstart Netwrok Foundation in the year 2007. This is a non profit organisation that promotes entrepreneurship. Aditya founded SwitchME in the year 2012. SwitchME was a pioneer in the field of specialised home loan advisory, conveniently based on an online platform. Today SwitchME has helped over 1000 customers with new home loans and balance transfers right at their doorsteps.
3 COMMENTS

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  1. umashankar
    Jan 30 2016 at 10:14 am
    Reply

    I have taken a educational loan of rs.35lacs from credila financial for his aboard studies the rate of interest is 14.5% now I want to change it to SBI. Is It possible sir?. If yes whatare the terms and condition. I father is the co-guaranter for the loan and plugged the House paper for the same. I repaid 17 lacs with interest balance is around 27 lacs with interest.

    Please help me how to go about transferring to SBI.

    • Sumita Nath
      Sumita Nath
      Sep 30 2016 at 5:16 pm

      HI,

      Sorry for the delay in response and we do not deal in educational loan transfer. Please get in touch with any of the Sbi branch to raise your query.

  2. itsmenexxus
    Aug 01 2014 at 11:40 am
    Reply

    This is one of the smartest decisions by RBI in Recent times..It was some what an hassle to preypay your loans before..this is defnitely good news