No Pre-payment Charge on Dual Rate HFC Loans

Print Edition: September 2012

Now, you will not have to pay a penalty for closing a dual rate loan from housing finance companies (HFC) before the completion of the loan tenure.

The National Housing Bank (NHB), which regulates the nonbanking housing finance companies, has asked them not to charge pre-payment penalty on a dual rate loan, after the same has been converted into a floating rate loan.

Dual rate loans charge interest at a fixed rate for the first 2-3 years, and at floating rates afterwards.

At present, no pre-payment penalty is charged on floating rate loans. In the case of fixed rate loans, no pre-payment penalty is charged if the loan is pre-closed by the borrower out of his own sources.

Usually, 2-4 per cent of the outstanding loan amount was charged as penalty for pre-closing of loans.

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