I have a composite loan and I started constructing house after 3 years of getting this loan. Now bank is charging more interest. Is this correct? I also want to prepay the loan.
Most banks will ask you to start construction on the plot within 18 months of loan disbursal. If they find that construction has not commenced, they will convert the loan to a land loan and relevant interest rate will apply. We suggest that you check the terms and conditions of your composite loan. If the terms and conditions allow for an extension, you can go ahead and extend the date of your construction.
You must check with your bank if you can’t find the relevant details. There might also be terms and conditions as regards pre-payment of your loan. There is usually a waiting period before which you might not be able to prepay the loan. Also, some banks convert the composite loan into a site loan if the loan is foreclosed. Speak to your bank and find out the details.
If your bank doesn’t agree, consider a balance transfer to another lender. Usually, balance transfer for composite loans isn’t easy. Understand the process before you decide to go for a balance transfer.
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