Personal Loan Closure - Foreclosure, Affect On CIBIL & All That You Need To Know
Published on : February 16, 2020

Personal loans are thec most preferred form of loans because you can use the amount for any purpose. Another reason why people opt for personal loans is because they are readily available and are collateral- free. This means that the applicant does not have to pledge any collateral for obtaining such loans.

The terms and conditions for taking a personal loan varies from lender to lender. The emerging trend of getting instant personal loans online has made the lending market more competitive. Online personal loans can be obtained in 24-36 hours if you complete your application in one go and are creditworthy.  Also, while obtaining a personal loan online, you have the liberty to compare various lenders and choose the one that best suits your needs. Today, customers are spoilt for choice as fintech firms are providing innovative loan products that are tailored to suit their needs.


How To Close Your Personal Loan – Explained


Personal loans are mostly short-term loans with tenures that do not last for more than 60 months. When you opt for an online personal loan, you have the option of choosing your loan tenure. The terms of prepayment are also lenient with most lenders. With LoanTap, you have the option to make higher payments or foreclose your loan with no charges after six months of taking the loan. If you wish to prepay before six months, you can do so with minimal charges. Therefore, before you sign the agreement you must read the terms and conditions of closure very carefully.


Types of Personal Loan Closures


As discussed above, the terms of loan closure are mentioned in your contract. Based on the general criteria, loan closure can be classified into the following types:

  • Pre-closure or Foreclosure:

    This is when the borrower wishes to repay the loan before the end of the loan tenure. The main advantage of pre-closing your loan is that you save money on the EMIs and the interest that you pay on the principal. Some lenders allow foreclosure after 6-12 months from the date of loan sanction. If you wish to repay the loan before the mentioned period, you may have to bear certain foreclosure charges that are mentioned in the agreement. Online lenders, generally offer more flexibility of pre-payment.

  • Regular Closure:

    This is when the borrower makes the payment in instalments for the full tenure as mentioned in the agreement. The closure happens at the end of the pre-decided tenure when the whole loan has been repaid. There is no additional cost or charged involved.


How to Close Your Personal Loan Early ? Is foreclosure a Good Idea?

As discussed above, the pre-closure of personal loan before the agreed tenure may carry some penalties. Therefore, make it a point to read the terms of the foreclosure carefully before deciding to do so. The terms differ from lender to lender. For closure of offline loans, you need to follow the following procedure:

  • Visit the bank with all the documents. The documents required are: your identity proof, loan account number, bank statement showing last cleared EMI, and cheque or demand draft of the pending loan amount. These are not the final list of documents. They may vary from lender to lender. Please check with your lender before you make an appointment.
  • Check with the bank for charges or any fee that may be applicable for foreclosure. Once you have the final amount from the lender, you make the payment for the entire amount.
  • The bank will issue an acknowledgment letter for the same for future reference. Also, if you have submitted any documents at the time of taking the loan, it must be taken back from the bank.
  • Once the process is complete, the bank will send the closure certificate via post or e-mail.

For online personal loan, the outstanding loan amount is reflected in your online account created with the lender. Once you make the full payment of the outstanding amount, you will receive an acknowledgment of the same. After the whole process is complete, your lender will issue a NOC certificate or the loan closure agreement.


Procedure for Regular Closure of Personal Loan

There are no additional charges or clauses when the loan is paid according to the agreed terms and conditions. You must follow the following steps for offline personal loans once your last EMI is paid.

  • Visit the bank with the documents such as identity proof, loan account number and a cheque in case any amount is pending.
  • Check with the officer for any pending amounts. Make the payment of the pending amount if any and complete the closure formalities.
  • Once the loan account is closed, you need to take a No Objection Certificate (NOC) from the bank stating that there are no pending dues on your loan account and that entire principal amount had been repaid.
  • The bank will also issue a closure certificate after the entire process via post or email.


For online personal loans, you can access the payment information in your online account. Once the entire amount has been paid off the lender will close your loan account and issue a closure certificate stating that your loan has been paid in full.


Things to do once your personal loan is repaid

All your transactions, including payment, late payment, and no payment are recorded in your credit report. Based on this report, a credit score is generated that reflects your financial stability. Your credit score helps lenders assess your creditworthiness and in certain cases decide the  loan terms to be set.

Once your personal loan is repaid in full, it is the duty of your lender to update this detail to CIBIL where your credit records and credit scores are maintained.

To avoid any errors, once you receive your closure certificate you must check with CIBIL whether the information has been updated to your profile. If the closure is not reflecting in your history, submit a written request to the lender asking them to update your credit report with CIBIL.

Related Article – Credit report can have errors – How to fix them?



Whether you have taken a personal loan online or offline, it is very important that a proper procedure is followed to make sure that the loan closure process is complete as it has impacts on your credit score.