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Sanjeev Govila |458 Answers |Ask -Follow

Financial Planner - Answered on Dec 30, 2023

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more

Asked by Anonymous - Dec 21, 2023Hindi

Subject: Urgent Foreclosure Advice Needed for Private bank home Loan Dear Samrat, I am writing to you with an urgent request for your financial guidance regarding the foreclosure of my home loan with a private bank. Loan Details: • Loan Amount: INR 190,000 • Interest Rate: 10.40% p.a. • Disbursement Date: july 2013 • Original Loan Term: 20 years • Current Outstanding Balance: INR 1,100,000 My Concern: I have been making consistent payments on my loan since its inception. However, now I am now interested in closing the loan nine years early, When I contacted the bank to inquire about the foreclosure amount, to my surprise, they informed me that it would be the same as the outstanding balance, i.e., INR 1,100,000. This was unexpected as I anticipated the balance to be significantly lower due to the early closure My Request: can you explain why the outstanding balance hasn't decreased more significantly despite early closure request? • Considering the nine-year early closure, can you please suggest any strategies I can utilize to negotiate a lower foreclosure amount with the bank? • Additionally, please advise on any alternative loan options or financial strategies that might be advantageous in my situation, taking into account the early closure goal. Thank you for your immediate attention and expertise. I eagerly await your guidance in this matter.

Ans: • The bank's claim of INR 11,00,000 as the foreclosure amount is likely correct, even though you've been making consistent payments. In the initial years, home loans involve significant interest charges. Your monthly payments (EMI) primarily cover the accruing interest initially, with a smaller portion going towards the principal.

• Check your loan agreement or contact the bank for details on any prepayment penalties. Negotiate to waive or reduce the penalty, especially if you have a good repayment history.

• For the alternative option, you can connect with your existing bank for the loan refinancing or loan restructuring. It would help you to revise your existing loan, such as interest rates, payment schedules and other terms. You can also connect with other banks or NBFCs for the same. They will provide you the better option compare with your existing bank.

Before moving forward with any choice, we advise you to carefully consider your options and assess your financial status.

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