Availing a personal loan also means that you need to close that loan within a specific period to avoid any late penalties. Paying off the loan with the highest rate of interest first, this will help ease the financial burden. If you have availed an instant personal loan, you need to prioritize closing the personal loan early or else it can increase your debt burden.
1. Pre-closure charges
Most banks and lending institutions charge a foreclosure fee/penalty when borrowers decide to repay the loan before the tenure. While in case of home loans, there is no penalty levied, vehicle loans and personal loans do invite prepayment penalty, which ranges from 1% to 5% of the outstanding balance before the pre-closure. The pre-closure charges on Bajaj Finance Personal Loan is 2% of the amount paid to exceed 25% of the principal outstanding for the year. 4% of the principal outstanding as on the date of foreclosure and 4% on the total amount withdrawn as on the date of preclosure.
- Obtaining NOC
A NOC or No Objection Certificate acts as a proof that you have cleared all your dues and there is no outstanding loan on the account and the lender does not have any more legal right on collateral or documents given.
- Obtain all your original documents
While sanctioning loans, banks take some important documents like sale deed, conveyance deed, Power of Attorney, cancelled cheque, etc. So while closing the loan, you must take back all the essential documents which you had submitted earlier.
- Removal of Lien
Many times the lender puts a lien on the property of the borrower to refrain him from selling the property. Thus, after your home loan repayment, you must visit the registrar office along with the bank officer to remove the lien against your property. In case of a vehicle loan, you need to visit the regional transfer office to complete the hypothecation removal procedure.
- Ensure updation of your CIBIL Score
It is the duty of the bank or the financial institution to update your loan repayment action in the CIBIL database. “But many times banks delay in this process, and due to this, the borrower’s CIBIL report shows outstanding balance despite paying all dues. This might create a problem in applying for a new loan.
Documents Required Closing A Personal Loan
- The loan account number mentioned on the loan statement.
- The borrower’s identity proof such as Aadhaar Card, Passport,
- Voter ID card, etc.
- Documents like a personal loan approval letter, loan account statement and other such documentation issued by the lender.
- Loan EMIs paid till date.
- Cheque or demand draft.
Regular Closure Of Personal Loan
- Step 1: For a regular personal loan closure, you need to pay a stipulated amount and number of EMIs for personal loan repayment.
- Step 2: You need to inform the bank that you’ve reached the end of the loan amount to verify the claim.
- Step 3: Submit your ID proof, loan account number and a cheque if you have any outstanding dues. The submitted documents will go under verification by the lender before the closing of the loan.
- Step 4: The final step is to get a No Objection Certificate (NOC) from the bank or financial institution; this will serve as proof of regular loan closure by full repayment of the loan.
- Step 5: You can also get in contact with the customer support team regarding the closure of your loan account.
Pre-closure Of Personal Loan
- Step 1: Personal loan pre-closing procedure remains the same wherein you inform your lender to check the outstanding loan amount for loan repayment.
- Step 2: Submit all the required documents along with the information regarding personal loan EMIs and a cheque to clear any remaining dues.
- Step 3: Some lenders might charge penalty charges on prepayment of the loan, which has to be settled along with the loan amount.
- Step 4: Once all the formalities are completed, the loan account is closed, you will be issued an acknowledgement letter with the details of clearances. This letter will be preserved as proof of pre-closure of the loan.
- Step 5: The borrower can also procure a No Dues Certificate (NDC) from the financial institution.
Also, you can download our Finserv MARKETS personal loan app and apply for a personal loan in quick and easy steps.