Personal Loan Pre-closure Procedure | GRD India - 2023 Overview
Personal loan can be useful in cases of extreme financial necessity, such as for weddings, home repairs, emergency medical care, etc. However, you should think about pre-closing your personal loan so that you are free of it whenever you have extra cash on hand.
Types of personal loan provided by banks
Closure of personal loans regularly
A conventional personal loan ends when the borrower makes equal monthly payments. After the final monthly payment, the borrower must be notified of closing the loan and provide a no-objection certificate and finally a loan completion certificate.
Partial Repayment of Personal Loan
If a loan borrower really wants to reduce the monthly repayments and tenure of the whole personal loan, partial repayment of the personal loan is a really good option. Partial payment amounts are subject to the terms and conditions which are stipulated by the financial lender.
Personal Loan Pre-closure
Personal loan pre-closure is basically possible when the borrower decides to repay all of the personal loan amount before the decided time. In many cases, the borrower can choose to pre-close the personal loan after one year or pay a minimum of 12 EMIs. While prepaying the loan amount, the borrower has to pay EMI, outstanding balance charges and foreclosure charges.
What is pre-closure of a personal loan
Financial organisations offer their consumers the better option of prepaying their loans very easily, with this help hand any borrower can prepay their loans,do it before dues of the loan's due date has passed. Prepayment is one of the most important factors that all borrowers should take into account when applying for a personal loan.
Personal loan pre-closure may not be an impossible feat. However, it is crucial that
you fully comprehend the procedure when applying for a personal loan from a bank
because it may vary from one bank to another.
Following some fundamental procedures while pre-closing a personal loan are
- Finding the closest bank location so you can pre-close your loan is necessary because personal loan cannot be pre-closed online. To locate the branch closest to you, call the bank's customer service hotline.
- If you do not already understand the pre-closure process, you can ask a bank executive in the loans department to explain it to you when you visit the bank. You can ask for a pre-closure form after you are informed of the procedure.
- Read the form carefully and fill it out with all the necessary loan information and personal information. After you have filled out the form completely and accurately, sign it.
- A series of documentation must also be submitted in order to pre-close your loan. Some of the paperwork needed includes Identification documents like a :
- Passport, driver's licence, or Aadhar card loan agreements.
- bank statement showing the final EMI's payment and clearance.
- Pre-payment statement, available upon request to the bank.
- You can receive it in the mail or online.
- After submitting all required paperwork, you can pay by check, demand draft, or cash.
- You can send a representative to visit the bank on your behalf if for any reason you are unable to do so on your own. However, a letter of authorisation properly signed by you should be carried by your agent.
- Along with the necessary paperwork, he or she should have the loan applicant's identification (such as a PAN card, passport, driver's licence, or voter ID).
- Letter of authorization from the loan applicant.
- The bank will provide you with an acknowledgment letter once you have completed all the stages; this document needs to be securely maintained.
- A few days after the loan is closed, you will get the loan agreement's final closing In addition to relieving the monthly financial stress, paying off personal loans boosts your mood.
- Calculations may assist you in determining whether it is wise to pay off a personal loan early or not, but ultimately it is up to you to determine whether you want to save money on interest or regain your peace of mind.
Things to do while closing your loan
When applying for a loan, whether it be a personal loan, home loan, auto loan, or any other form of loan, the majority of individuals take numerous measures. However, when closing or pre-closing a loan, people frequently become careless. After paying off the final EMI, they just exhale with satisfaction and often forget to follow the rules, which can get them into difficulty later. Here, we'll look at several Essential actions that must be taken while closing or pre-closing a loan.
1. Know about your pre- closure charges
When borrowers choose to repay the loan before the tenure, the majority of banks and NBFCs impose a foreclosure cost or penalty. While there are no prepayment charges for home loans, there is one for auto loans and personal loan that can range from 1% to 5% of the remaining sum prior to the pre-closure.
2. Obtain NOC
An NOC, is known as a no objection certificate, which will be the evidence that you have paid all of your loan completely, a proof of there is no outstanding loan on your account, and that the lender no longer has any legal claim to the given collateral or supporting documentation. It saves you in causing any future disagreements with the lender. Therefore, be sure to collect the NOC that contains all information which can justify your debt information, it contains your name, address, loan account number, and closing information, etc.
3. Collect your all important documents
- Receipt for pre-closing payments.
- The personal loan can be closed with a No
- No Objection Certificate.
- Certificate of closure of a personal loan.
- Certificate of dues payment.
- Power of attorney papers, which you given them at the approval time
4. Insure your latest cibil report
The bank or other financial institution is responsible for updating the CIBIL Score with your loan repayment type. But frequently, banks take their time, and as a result, the borrower's CIBIL report still shows an overdue sum even if they have paid all of their obligations. This can make it difficult to get a new loan. Therefore, you must review your most recent CIBIL report and, if necessary, ask your lender to update it.
5. Required documents for your personal loan pre-closure
The required loan paperwork
Identification documents such as a passport, an Aadhaar card, a voter ID card, etc.
Passport size photo.
Loan account statements that list the EMI payments made so far.
Request draft or a check.
Que. Are the fees associated with foreclosure applicable to all financial lenders?
Ans. No, foreclosure costs are not imposed by financial institutions like State Bank of India and Axis Bank etc.
Que. Are there fees for making partial payments on a personal loan?
Ans. Financial lenders typically don't charge borrowers who want to make partial payments on their personal loan, but in order to do so, the borrower must adhere to the terms and conditions established by the bank.
Que. Which one will benefit my credit score more?
Ans. Having a longer credit history also positively affects your CIBIL score, even though making pre-closure and closing loan repayments will be favourable for your credit score and reputation with the lender. showing your identity.
Que. Could there be a reason why the lender stopped my pre-closure?
Ans. You must have to accept the terms and conditions implemented by the lender in order to pre close your personal loan. The majority of lenders only permit pre-closures after a particular amount of time, say 6 to 12 months of uninterrupted EMI payments.
Que. Your credit score: Does Pre-Closure Affect It?
Ans. No. Pre-closure is essentially paying off all your debts before the dues. Without a doubt, it has no impact on your credit rating. Your credit report will always show a 'closed' status once you have fully returned your debt.