One can get a personal loan to celebrate their silver jubilee anniversary or purchase a high-end product to gift their loved one. But, a personal loan is not only for toasting gala moments of life; it also comes in handy to solve unexpected financial constraints like emergency health treatment, house repair, etc.
However, when obtaining a loan, one may need to remember the crucial steps, such as closing a personal loan. To be worry-free and prepare for any misleading and unexpected future mishaps, here are 5 essential things to consider when closing a personal loan.
Here are some of the ways to close a personal loan:
A regular personal loan closure is when the borrower meets all terms specified in the agreement, which involves timely payment of all interest within the stipulated payback period.
Personal loan pre-closure refers to paying the amount before the end of the tenure. In most cases, it is allowed after a year or a minimum of 12 EMI on regular payment of the loan amount, depending on the lender.
Personal loan part prepayment is an option that allows borrowers to either shorten the loan tenure or reduce monthly installments, providing increased flexibility and potential interest savings.
Closing a personal loan includes an exit with all the required documents, whether received or submitted. Proper personal loan closing is mandatory to safeguard against any future unannounced climaxes that play against.
Most banks and NBFCs charge a foreclosure fee if the balance is paid in one payment. Before agreeing to a personal loan, it is advisable to check with the lender about the terms and conditions and the applicable charges in case of pre-closure of the loan amount.
A No Objection Certificate is a document that states that the borrower has cleared all the repayments along with any additional fees attached to the loan. This implies that any collateral or supporting documents are now in the borrower's hands, and the lender has no legal rights.
Pre-closure charges may apply if you plan to repay your loan before the agreed tenure, subject to the lender's terms. However, you must be aware of several charges, such as processing, legal, and other administrative fees, while planning to close a personal loan.
Documents like cancelled cheques, power of attorney, conveyance deeds, sales deeds, etc., are crucial documents lenders ask for to check the borrower's legitimacy before sanctioning the loan amount. However, after repaying the loan amount and closing the loan, the borrower must ask the lender to return all the essential documents.
Financial institutions are responsible for ensuring that the borrower's CIBIL score is updated in the CIBIL database after repayment and closing of the loan. If the borrower's outstanding balances are not updated due to a technical error, it can affect the CIBIL score, especially when acquiring a new personal loan in the future.
A personal loan is a tool to attain financial freedom. It can be used to waive off accumulated debts, buy products, or in case of a financial emergency. Remember, the things to do while closing a personal loan might feel tedious and overwhelming. It's one of the important ways to mark yourself as a responsible borrower who has duly paid.
If you're planning to close your personal loan, follow the steps outlined above for a seamless process.
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