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Do this before prepaying your home loan

loan, car loan, home loan, personal loan

By Chaitali Dutta

* My friend is advising me not to prepay my home loan which has completed 13 years and another seven years are left. He says the interest rate is much lower after factoring in tax rebate. Is he right? Gunjan Prasad

Your friend has raised a valid point. However, even after factoring in the tax benefits, it is still an out-go from your pocket. If you can invest that same money in products suitable to your risk profile, and earn at least 2% more than the effective interest rate on the loan, then it is better not to prepay the loan.

* Does a car loan interest rate remain fixed for the entire tenure of five years? Sachin Kumar

A car loan is on a floating interest rate usually. Sometimes in special company tie-ups, you may find a fixed rate of interest. But here you lose the flexibility to repay it.

* When I took my car loan, the bank took six blank cheques. My loan will end after two months. Can I get back those cheques? Gaurav Sharma

That is highly unusual. Hope you have the cheque numbers with you. Please put a stop payment on those cheques. Then no one can misuse the blank, signed cheques.

* Can I repay my personal loan without paying any penalty? Vikas Swaroop

There are no uniform rules in personal loans. Ask for the details before signing on the papers. Usually, banks allow prepayme-nt after a specific period only. Loans with a fixed rate of interest cannot be prepaid.

* How can I get an education loan for my son who is going to the US for MBA? Pramod

First, the course should be a recognised professional/ technical course. Loan would be sanctioned in joint name with you as earning member. For interest paid in the moratorium period, you may avail income tax benefits. Amount of loan is Rs 20 lakh- Rs 1.5 crore. Usually, the repayment would start six months from the completion of the course. Ask your bank where you have an existing relationship for this loan.

* As many NBFCs are facing problems, is it fine to take a loan from one of them? RS Khera

It is the depositors who need to be aware of the risks involved and take a decision accordingly. For a home loan, the NBFC is parting with the funds (by giving the cheque to the builder), you, being the borrower, will be repaying the loan.

(The writer is founder, AZUKE Personal Finance Advisory ( Send your queries to