Pre-payment penalty for loans- Good or Bad?

[deepakraam]

If you want to close your loan before the loan tenure,the you will have to pay something called-prepayment penalty.The penalty will be more during early periods of the loan and will reduce towards the late stages of the loan tenure.The main point for charging the fine is banks are loosing the interest on the loan amount for the pending periods of time.But from a lenders perspective he/she is penalised for fullfilling his obligation.

So wats ur call on pre-payment penalities-Do we need this or not?

-Deepak.

[venkatn]

Pre-payment penalty for loans is not required and it has to be eliminated. When we borrow loans we pay processing charges and there is no need to pay a penalty if we pre-close a loan.

[bose66]

There should not be any Pre-payment penalty for any type of loan. We have to pay processing charges which cover for any administrative cost incurred, then why pay out the 2 to 4% prepayment charges. GOI should step in to stop this fleecing of customers.

[theaquarian]

Prepayment penalty is used by banks as a last ditch effort to extract whatever little they can out of a customer who is walking out over them. It should be abolished.