Process Of Closing A Personal Loan

A personal loan is of great assistance in case of any urgent financial requirement. It is an unsecured financial instrument with a high-interest rate, in comparison to a secured loan. Is it is available at a high rate of interest, paying it back for a longer tenure can cost you a great deal? If you have taken an instant personal loan, you should work towards repaying it and closing the loan in the shortest time duration, else it would just add to your financial burden. Prepayment and closure of the Personal loan help you to save more in your monthly budget. You can even start investing and gain returns.

Requirements for closing a personal loan–

• Personal Loan Account Number

The most essential item to close a personal loan is your Personal loan account number, which can be easily attained from the loan account statement.

• Identity Proof

Proof of your identity is a prerequisite to close a personal loan. For this, you can use your PAN card, Aadhaar card, Voter Id card or any other government-issued identity document to show it as an identity proof.

• Other Loan Related Documents

Other loan-related documents include a loan approval letter, loan account statement and other documents issued by the lender.

Closing a Personal Loan –

One can either repay the loan regularly till the completion of the entire tenure, or one can prepay the loan to reduce the debt burden.

• Regular Closure–

In regular closure of a personal loan, a personal loan borrower makes regular payments and pays off the loan in the same tenure period as mentioned in the loan agreement.

• Charges for Regular Closure–

No fee is imposed when you choose for regular closure of a personal loan. You have to only pay the installments.

• Step to follow for a Regular Closure
• Inform your lender about the closure of your loan, once you have paid the last installment of your loan.
• You should carry the required documents such as ID proof, a cheque with the final payment (if applicable), the loan account number and any other loan-related documents issued at the time of loan approval. The bank will verify the documents before proceeding for the closure of your personal loan.
• A No Objection Certificate (NOC) will then be issued by your lender once all other process is completed. The NOC denotes that the borrower has repaid the complete loan and has no pending dues.

Additional Reading – Eligibility Criteria For Instant Personal Loan

• Personal Loan Prepayment

A loan is said to be pre-closed when you repay the loan before the loan tenure ends or when you repay the loan in a shorter time period than mentioned on the loan agreement. A pre-closure of a personal loan can save a large number of interest costs if done at the right time. Often banks have different lock-in periods, prior to which you cannot close the loan. Furthermore, banks also impose charges for the pre-closure of a personal loan known as pre-closure charges.

• Charges on prepayment of a Personal Loan

Every bank has its own policies on pre-closure, some allow pre-closure on paying a charge and others don’t approve of pre closures.

Additional documents required in case of pre-closure

• Pre-closure Quote.
• Visit the bank to check the outstanding loan amount and any pre-closure charges or penalties. And once you have the exact amount, you can pay the bank to close your loan.
• Demand draft or Cheque is required for pre-closure of the loan.

Steps to pre-close a Personal Loan

• Visit the bank and know their pre-closure policies.
• If applicable, you will have to fill a form or write an application requesting pre-closure of your personal loan account.
• You will have to pay the pre-closure charges.
• Sign the pre-closure documents, if applicable.
• Remember to collect the acknowledgment of the balance amount you have paid.

Your personal loan account will close once the money is received by the bank. The bank will then dispatch the loan closing papers to you.

Additional Reading – Everything About Instant Personal Loans (PL)

                           Check your maximum Personal Loan eligibility

                    

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