Closing a Personal Loan involves several steps and paperwork to make sure you have paid off your debt successfully. You need to follow the rules for closing early, if there are any, and be aware of any extra fees. Read on to learn about different ways of the Personal Loan closure process and what you need to know to do it right.
Following are some of the most important reasons why you need to close your loan:
When deciding how to close a Personal Loan, it is crucial to consider the fees, penalties, and advantages. Before choosing, it is wise to talk to the lender and understand the terms of the loan. Here are the different methods for the Personal Loan closure process:
1. Regular Personal Loan Closure
A regular Personal Loan closure occurs when the borrower pays all the EMIs. After the payment of the final EMI, the borrower must inform the lender to issue a No Objection Certificate and, finally, the Loan Closure Certificate for closure of the loan.
2. Personal Loan Pre-closure
Personal pre-closure is basically when the borrower decides to close the Personal Loan before the stipulated period. In most cases, the borrower can opt for a Personal Loan pre-closure after one year or pay a minimum of 12 EMIs. For foreclosure of the loan, the borrower might have to pay personal loan foreclosure charges, as per the lender’s policy.
3. Personal Loan Part-Payment
If the Personal Loan borrower wants to reduce the monthly instalments and tenure of the Personal Loan, he can opt for the Personal Loan part payment. The partial payment amount will be subject to the terms and conditions prescribed by the financial lender.
Personal Loan pre-closure occurs when a borrower decides to pre-close in full or part. i.e. before the end of the fixed tenure of the Personal Loan. The pre-closure charges are levied on the pre-closure of the loan by the lender on the borrower. The lender determines the percentage of the borrower’s payments or outstanding loan balance.
Generally, the pre-closure charges range between 1% and 3%. In case of a lock-in period, you cannot pre-close your loan before the end of the lock-in period. The lock-in period can be between one to twelve months.
Pre-closing a Personal Loan may not be a difficult task. However, you must understand the process properly while taking a Personal Loan from a lender, as it may differ from one lender to another. There are some basic steps you can follow while pre-closing for a Personal Loan closure process:
Paying off a Personal Loan is a mental boost as it relieves you of the financial burden that you bear every month. Calculations can help you decide whether paying off a Personal Loan early is a good idea, although it is your personal choice if you want to save your money on interest or get your peace of mind back.
There may be instances when you may be eligible for a bonus or windfall profit from some other source that you wish to use to pay off your loan. However, the amount may not be enough to pay off the entire loan. Then, you can opt for partial prepayment of the loan.
Partial prepayment of the loan will also involve certain penalties. Be careful with them, as lenders may also restrict repeated part-prepayments and allow only a limited number of them. Each of these terms varies between lenders, so it is a good idea to check with them before making a prepayment.
Also, it will not close your loan account. After the part prepayment of the loan, you may be left with some more EMIs, which will have to be paid immediately.
Follow these steps to complete the regular closure of your Personal Loan
In case of any query, you can also call the customer care of the lender and seek assistance in closing your loan.
To ensure that you close your loan application appropriately, you need to know what you need:
Here are some of the most important things you need to keep in mind after your Personal Loan closure process:
1. Retrieve Original Documents: Ensure you collect all original documents submitted during the loan application from the bank.
2. Obtain No Objection Certificate (NOC): Request a NOC from the bank confirming full repayment of the loan, including interests. Make sure the NOC includes your name and account number.
3. Update CIBIL Report: Write to the lender requesting them to update your CIBIL report to reflect the loan closure. Verify that this update is done promptly.
4. Authorisation for Closure: If you cannot personally visit the bank for closure, authorise someone to do it on your behalf. Obtain prior approval from the bank for this.
By following these steps, you can ensure a smooth conclusion to your Personal Loan process.
Closing a Personal Loan generally has a limited and temporary impact on your credit score. While it does not drastically affect the score, it can influence factors like your credit mix, payment history, and credit utilisation. Maintaining a balanced mix of credit types and a history of timely payments is crucial for a good score.
However, closing a loan prematurely may reduce the opportunity to demonstrate consistent payment behaviour. Additionally, it is important to be mindful of how closing a loan might affect your overall credit utilisation ratio and the number of open accounts on your credit report. Overall, the impact of closing a Personal Loan on your credit score is typically minor compared to other factors affecting creditworthiness.
There are a few things you should keep in mind for your Personal Loan closure process to ensure that it is done seamlessly. Remember all the terms and conditions, associated charges, and documents required for the closure.
If you complete the closure process by keeping all these factors in mind, you will be able to avoid any future complications with your loan and maintain a high CIBIL score. Now that you have a comprehensive idea about the loan account closure avail a Personal Loan from Poonawalla Fincorp. Apply now to get loans with zero foreclosure charges.
1. How to avoid foreclosure charges on their Personal Loan?
Foreclosure charges are typically unavoidable unless you make a specific request to your lender, and they agree to waive them. If you wish to avoid pre-closure charges, it is essential to reach out to your lender and inquire about the possibility of having them waived.
2. Could there be a reason why my pre-closure request was halted by the lender?
To initiate a pre-closure of your Personal Loan, you must adhere to the terms and conditions set by the lender. If you are facing any issues with the foreclosure, get in touch with our representatives.
3. Why is it important to close a Personal Loan?
While it is not mandatory to close a Personal Loan, doing so can offer various benefits to the borrower. Closing the loan allows one to become debt-free sooner and may reduce the total interest payable over the loan term.
4. Are there any charges for part payments on a Personal Loan?
Typically, financial lenders do not impose charges on borrowers who wish to make part-payments towards their Personal Loan. However, borrowers must still adhere to the terms and conditions outlined by the financial institution to facilitate part payments.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
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