A personal loan is a popular choice of financing for individuals seeking funds for a variety of purposes, including weddings, medical expenses, and home renovations. However, once the loan has been fully utilized and the repayment term has ended, the borrower must officially close the loan account. Loan closure refers to the process of repaying the entire outstanding loan amount along with any applicable charges to the lending institution. Failing to close a loan account can lead to additional interest charges and penalties. Here we will discuss various ways to close your personal loan, including pre-payment, EMI adjustment, and foreclosure. Borrowers can choose carefully and eventually save money if they are aware of their possibilities.
Types Of Personal Loan Closure
When it comes to instant personal loans, borrowers have various options to close their accounts once the repayment term has ended. Let’s examine the various categories of personal loan closures in more detail:
Regular personal loan closures:
This is the most common method of closing a personal loan account. In this type of closure, the borrower repays the entire outstanding loan amount along with any applicable charges to the lending institution on or before the final due date. The lending institution then provides a No Objection Certificate (NOC) and a loan closure letter to the borrower, indicating that the loan has been fully paid off and the account has been closed.
Personal loan pre-closure:
Pre-closure refers to the repayment of the outstanding loan amount before the end of the loan tenure. In this type of closure, the borrower can repay the loan in full or in part. By prepaying the loan, the borrower can save on interest charges and reduce the overall cost of borrowing. However, some lending institutions may charge a prepayment penalty, which is a fee levied on the borrower for closing the loan account early. It is important to read the loan agreement carefully and understand the prepayment terms and conditions before opting for this method of closure.
Personal loan part-payment:
Part-payment is similar to pre-closure, but instead of paying the entire outstanding loan amount, the borrower pays a certain percentage of the total amount. The remaining balance is then repaid through regular EMIs. By making a part payment, the borrower can reduce the loan amount and the interest charged on it. However, similar to pre-closure, some lending institutions may charge a fee for part payment. It is important to check the loan agreement and understand the terms and conditions before choosing this method of closure.
Procedure For Regular Closure of Personal Loan
Regular closure of a personal loan is the most common way of closing a loan account. It involves repaying the entire outstanding loan amount along with any applicable charges to the lending institution on or before the final due date. Here is the step-by-step procedure for the regular closure of an instant personal loan:
- Visit the bank/lender’s office with identity proof, loan account number, and a cheque if there are any pending payments.
- Check with the officer for any pending payments and pay them, if any.
- Get a No Objection Certificate (NOC) from the bank, stating that there are no pending dues on the loan account and that the principal amount has been repaid.
- The bank will also issue a closure certificate via post or email once the process is complete.
If you have an online personal loan, you can find the payment information in your online account. After paying off the entire loan amount, the lender will close your loan account and provide a closure certificate confirming that your loan has been fully repaid.
Documents Required For Personal Loan Pre-Closure
- All the relevant loan documents
- Address and Identity Proof – Passport, Aadhar card, Voter ID card, etc.
- Loan statement showing the details of EMI paid to date
- Cheque or demand draft
Documents To Collect After Personal Loan Pre-closure
- Pre-closure payment receipt
- NOC to close the personal loan
- Personal loan closure certificate
- Payment of dues certificate
Closing a personal loan is an important financial milestone. There are various ways to close your personal loan, including regular closure, pre-closure, and part-payment. It is essential to choose the right method that suits your financial situation and ensures hassle-free closure. By following the appropriate procedure for loan closure and obtaining the necessary documents, borrowers can complete the loan closure process smoothly and ensure a good credit score.