In today's time, a home loan proves to be very helpful in realizing the dream of your house. However, many times the interest of a home loan is more than the cost. In such a situation, we try to repay the loan as soon as possible. To repay the loan on time, we also have the option of pre-payment. By selecting this option, you can get financial freedom before the loan tenure.

However, before this option, we should take special care of some things. According to many people, a charge has to be paid in the home loan pre-payment option. We will tell you below how correct it is to select the home loan pre-payment option.

What is home loan pre-payment

In the pre-payment option, you pay a part of the loan before the deadline. People choose this option to save interest expenses. Apart from this, by selecting the pre-payment option, your loan ends soon, which gives you financial freedom. If you select this option, you should first check that the bank will not charge you any penalty on pre-payment.

Is there a charge on pre-payment?

Many banks or financial institutions charge a penalty for pre-payment of the loan. This amount can be a percentage of the outstanding loan amount or a flat fee. Many banks charge a penalty only in the initial years of the loan. After this, many banks do not charge this penalty and some banks charge a penalty based on the payment of interest.

On the other hand, many banks do not charge any penalty for pre-payment. In such a situation, you should understand the terms and conditions of pre-payment before signing the home loan agreement. Apart from this, you should also know about the terms and conditions of other banks.

Keep these things in mind.

You should understand the calculation of penalty and interest before selecting this option. Sometimes the penalty becomes more than the interest. In such a situation, a decision should be taken only after doing all kinds of calculations.

If you select this option, then you should keep in mind that it should not impact your emergency fund at all. If this happens, then you may face financial problems in the future.