Repayment of a personal loan is commonly done through equated monthly installments (EMIs). The loan tenure is usually from 12 months to 60 months. You make the repayment through post-dated cheques or through standing instruction for automated electronic debit from your bank account.
You also have the option to repay your loan ahead of the tenure. This is called prepayment. Many banks charge a hefty prepayment penalty of about 5% on the outstanding principal. Despite the heavy prepayment penalty, it is advisable to prepay your loan if you have the means to do so.
You can also transfer your loan from one bank to another bank. This is done to take advantage of lower interest rates. If you had taken a 4-year personal loan two years back at 18% interest rate; interest rates have now fallen down to 14%. You can take a new loan that will foreclose the previous loan. This means that you will be paying a smaller EMI than previously. All you will need to calculate is whether there is an economic benefit to you in shifting your loan from one bank to another after evaluating the cost of shifting - essentially, the prepayment penalty and the processing fee for the new bank.
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