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Reserve Bank of India has banned prepayment penalty for floating loan rates,this means if you wish to close out the loan amount earlier you can do so without any penalty

When I took the house loan,my banker told me that every year after the first year,I can pay maximum 25 per cent of remaining amount as lump sum repayment. Is there a penalty on part-prepayment of home loan?

Sutopa Vij ,Mumbai

Reserve Bank of India has banned prepayment penalty for floating loan rates,this means if you wish to close out the loan amount earlier you can do so without any penalty. However,banks may take some time to bring this into effect. Therefore,check with your bank on the current provisions. Also if you are making only partial prepayments you may need to adhere to the restrictions imposed by the bank even if penalty is waived.

Talk to your bank for clarity and make sure to discuss RBI8217;s ban of prepayment penalty as well. Do remember that this is restricted only to floating interest rate loans and does not apply to fixed interest rate loans.

I am a spendthrift and I feel the need to save but by the time last week of the month comes,I am out of money as I do not use a credit card. Could you suggest me a way out of this mess?

Tarun Tomar,Chandigarh

Be glad that you are atleast spending only what you have earned and not spending through a credit card,which can lead to bigger worries. In your current situation atleast when your coffers are empty you need to stop spending. To start out on the path to planning and saving your expenses you need to monitor how you spend your money. For this you have to make it an everyday habit to track your expenses. Try an excel sheet or a budget software that is available online or the good old accounting notebook to religiously record how you spend your money. Collect bills on a daily basis and total them everyday. At the end of every week or month 8211; when you review these expenses you will have a fair idea of how you spend or money or on what you spend on often. Once you identify the areas where most of the money goes 8211; you need to think of innovative ways to curb that expense.

For example,if you eat out at lunch everyday in office,consider packing a basic lunch from home. This can significantly save cost. If you spend too much on partying out,try and devise a way where you share the expenses with your other friends or take turns in spending. Small measures like this can go a long way in restricting expenditure and increasing savings.

The expert is CEO,Bankbazaar.com
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