Sbi Loan Closure: Early Exit Fees And Charges?

The State Bank of India (SBI) allows customers to make early repayments on their loans, which can help them save money on interest and close their loan sooner. However, SBI may charge a pre-closure penalty for this service, which is typically calculated as a percentage of the outstanding loan amount. This pre-closure charge is usually around 3% of the prepaid amount, but there are certain conditions where this may vary. For example, SBI's Rent Plus loan product imposes a prepayment penalty of 1% of the loan amount prepaid, and foreclosure charges of 3% + GST on the outstanding balance if the loan is closed within two years of disbursement.

SBI personal loan pre-closure charges

• If the loan account is closed after 3 years from the loan issue date.
• When the loan is closed using the proceeds of a new loan account opened under the same scheme.
• If the loan is closed after 6 months from the sanction date.
• If the pre-closure is done after a specified period (usually one year).

SBI enables you to make a pre-payment or pre-closure for your personal loan. You have the flexibility to pre-pay in full or in instalments. Moreover, you can do it at any phase of your personal loan. With the exception of Rent Plus, which imposes a prepayment penalty of 1% of the prepaid loan amount, there are no prepayment or pre-closure penalties. If you close your personal loan account with the proceeds of a new loan taken out under the same loan type, you will not be required to pay any foreclosure or pre-payment charges. Foreclosure costs of 3% + GST on the outstanding balance will only be assessed if the property is closed within two years of the loan's disbursement.

It is important to note that the pre-closure charge may vary depending on the specific terms of the loan agreement. It is always a good idea to check with your lender about the charges you will need to pay for pre-closing your loan.

SBI home loan pre-closure charges

SBI allows you to make a pre-payment or pre-closure on your personal loan. You can choose to pre-pay in full or in parts and at any phase of your personal loan. However, SBI Rent Plus imposes a prepayment penalty of 1% of the prepaid loan amount.

SBI personal loan pre-closure charges are typically 3% of the prepaid amount. However, there are instances when pre-closure charges are not applicable, such as when the loan is closed after a specified period (usually one year) or when the loan account is closed after three years from the loan issue date.

For SBI home loans, the bank has decided to abolish pre-payment charges, giving borrowers the option to foreclose their accounts without penalty. This decision by SBI, the largest lender, is expected to influence other lenders to follow suit. Previously, SBI charged a pre-payment penalty of about 2% of the outstanding amount for housing loans with floating interest rates taken before May 2011.

Advantages of pre-closing an SBI loan

The State Bank of India (SBI) allows borrowers to pre-close their personal loans by paying off the outstanding loan amount in full. While SBI typically charges a prepayment fee of around 3% on the outstanding loan amount for fixed-interest-rate loans, there are several advantages to pre-closing an SBI loan. Here are some benefits to consider:

Savings on Interest:

Pre-closing your loan can result in significant interest savings. By repaying your loan early, you avoid paying additional interest that would have accrued over the remaining loan tenure. This can lead to substantial cost savings, especially if you have a long period left on your loan.

Improved Credit Score:

Prepaying your unsecured SBI personal loan can help improve your credit mix by reducing the proportion of unsecured loans. Increasing the share of secured loans can enhance your credit score and increase your chances of obtaining future loans. A higher credit score reflects positively on your creditworthiness and may result in better loan terms or interest rates for subsequent loans.

Reduced Repayment Burden:

By pre-closing your SBI loan, you can reduce your overall repayment burden. Early repayment eliminates the ongoing obligation of making regular EMI payments, freeing up cash flow for other financial goals or emergencies. This improved financial flexibility can provide peace of mind and help you manage your finances more effectively.

Alternative Investment Opportunities:

When you pre-close your SBI loan, you may be able to explore alternative investment opportunities. Consider whether the funds used for pre-closure could be invested elsewhere to generate better returns. By redirecting your money towards more lucrative investments, you can potentially increase your wealth and achieve your financial goals faster.

No Pre-closure Charges in Certain Cases:

In some instances, SBI does not levy any pre-closure charges for personal loans. For example, if the loan is closed after a specified period (usually one year) or if the loan account is closed using proceeds from a new loan under the same scheme, you may avoid pre-closure fees altogether.

It is important to carefully consider your financial situation, the potential savings, and any applicable fees before deciding to pre-close your SBI loan. Evaluate the advantages against any disadvantages to make an informed decision that aligns with your financial goals and circumstances.

Disadvantages of pre-closing an SBI loan

Pre-closing an SBI loan can have several disadvantages that borrowers should be aware of before making a decision. Here are some key disadvantages to consider:

Pre-closure Charges: SBI typically charges a pre-closure fee of around 3% of the outstanding loan amount for fixed-interest-rate loans. This fee can reduce the interest cost savings achieved by pre-closing the loan. However, there are instances when SBI does not levy pre-closure charges, such as after a specified period (usually one year) or if the loan is closed using another loan under the same scheme.

Impact on Credit Score: SBI personal loans are unsecured loans. Prepaying the loan reduces the proportion of unsecured loans in the borrower's credit mix. A higher share of secured loans can improve an individual's credit score and increase the chances of obtaining another loan. Pre-closing an SBI loan may negatively impact the borrower's credit mix and potentially affect their future loan eligibility.

Financial Strain: Pre-closing a loan requires a large sum of money to be paid upfront. This can strain the borrower's finances and deplete their emergency savings. It is important to ensure that pre-closing the loan does not adversely affect the borrower's financial stability.

Loss of Tax Benefits: Pre-closing a loan may impact the tax benefits associated with the loan. Borrowers should understand how pre-closure will affect their tax liabilities under relevant sections of the Income Tax Act.

Alternative Investment Opportunities: Borrowers should consider whether the funds used for pre-closing the loan could be invested elsewhere for better returns. In some cases, investing the money instead of using it to pre-close the loan may yield higher financial gains.

It is essential for borrowers to carefully evaluate their financial situation, consider the potential disadvantages, and make a well-informed decision regarding pre-closing an SBI loan.

SBI Rent Plus pre-closure charges

The State Bank of India (SBI) offers personal loans with competitive terms, and an important consideration for borrowers is the pre-closure or prepayment charges. Pre-closure charges are the fees levied by the bank when a borrower decides to repay the entire loan amount before the completion of the loan tenure. Generally, it is 3% of the prepaid amount. However, there are a few instances when pre-closure charges are not applicable. These include:

• If the loan account is closed after 3 years from the loan issue date.
• When the loan is closed from the proceeds of a new loan account opened under the same scheme.
• If the loan is closed after 6 months from the sanction date.

Most lenders only permit pre-closures following a specific amount of time, usually six to twelve months of consistent EMI payments. The merits of foreclosure vary depending on the circumstances. It could make sense if you have a lengthy tenure remaining and are saving money on interest. However, if the loan term is not too long, it is usually preferable to repay the debt in full.

Frequently asked questions