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 Can I foreclose or part pay my Loan Against Property?

Can I foreclose or part pay my Loan Against Property?

Loan against property is one of the most versatile types of loans you can avail. Simply because you can easily borrow a large sum of money based on your property at attractive interest rates as well. It is one of the most flexible types of loans you can avail from any bank simply because the end use is completely at your disposal.

Let us take a look at some of the important features of a Loan Against Property or LAP as it  is more commonly known:


-   Foreclosing on your loan means: after paying a certain number of emis, if you are having enough funds to repay your entire loan, it is known as pre-closure or foreclosure of your loan.

-   This means that you need not pay up the interest part of your loan, which indeed will make a great difference in terms of savings.

For instance, consider the following:


At the end of 1st year,  i.e. 12 emis, you would have repaid    Rs.2,71,155 of which


Suppose after paying 12 emis you plan to foreclose your loan.

Let the foreclosure charge be 2% of loan outstanding, which is Rs.39,120

Now, the total amount you will be required to pay:

=       Loan outstanding + Pre- closure charges

=       Rs.19,55,755        +          39,120

=       Rs.19,94,875

But, if you were to repay according to the amortization table then you will end up paying a total sum of Rs.44,37,079 over the course of 15 years.

Essentially your savings here would be:               Rs. 24,42,204.

-   Even after taking into account the charges for pre-closing your loan, you will end up saving a significant amount.

-   However, the duration after which you may pre-close your loan may be anytime after a minimum of 3 months to a maximum of 12 months, depending on the bank you have opted your loan from.

-   There are also charges applicable when you choose to prepay your loan. These charges may be anywhere between 1% to 4% of the loan outstanding. During certain special offers or if you have paid a particular number of emis (as specified by the bank) then there is a chance that your pre-closure charges might be slashed.


Part payment

So, incase you aren’t able to make the payment in one go, but are still looking to reduce your interest rate or emi burden then yes a pre part payment is a good idea.

What does it mean?

It means you can pay a lump-sum amount in one go without having to pay up the entire outstanding.

For instance, consider the following:


At the end of 1st year, i.e. 12 emis, you would have repaid       Rs.2,71,155 of which


Suppose you want to make a payment that amounts to five times your emi i.e. 5 emis, then you will see that your outstanding is significantly reduced and correspondingly your emi will also be reduced.

Your current emi is:       Rs. 24,650

If you are part paying two years emi: 24,650 x 5

                          =               1,23,250

Note: The amount you are paying as a part payment is always going to be in multiples of your emi. Some banks allow no more than 25% of the outstanding to be part-paid at a time and also, there are other banks that allow part-payments upto 3 – 4 times a year withoutany limit on the amount that can be paid. 

After making this part-payment your current outstanding will be:         18,32,505

Therefore, your current emi will be:                                                                       Rs. 24,136

-    You can either reduce the tenure or decrease your emi.

-    There is usually a minimal part payment charge applicable.


-     Suppose the value of your property has increased since the time you availed a loan against your property, and if incase you are in need of further funding, you can very well go ahead and get a larger loan amount.

-    This is subject to your fulfilling the eligibility criteria.

-    Taking up a top-up loan during a special offer will indeed get you the double benefit of getting a large sum of money as well as getting it at attractive interest rates.

It is always advisable to make good use of these features so that you save up a significant amount of money despite having taken a loan.

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