Personal Loan Closure Procedure That Needs To Be Followed

Taking personal loans help many individuals to ease their financial crunches. However, taking a loan also means that you have closed that loan within a specific period in order to avoid any late penalties. There are some additional advantages, including a affect of your credit scores , in paying off your loans before the stipulated time.

Nonetheless, there are some basic procedures that need to be followed while closing a personal loan, whether it’s a regular closure or a pre-term closure.

Before initiating the loan closure process, keep the following documents ready:

• Valid identity proof (PAN Card, Aadhaar Card, Passport, etc.)

• Loan account number

• Bank account details or passbook

• EMI payment records, if available

• Cheque or payment instrument for any outstanding dues

• Loan sanction letter (if required by the lender)

• Registered mobile number linked to the loan account

*Charges vary across lenders. Check your loan agreement or contact your lender for applicable charges.

Step 1: Verify Your Outstanding Balance

Contact your lender and confirm that all scheduled EMIs have been paid.

Online: Check your loan account through internet banking or the lender's mobile app.

Offline: Visit the branch and request a closure statement.

Step 2: Keep Required Documents Ready

Carry all necessary documents for verification.

Online: Upload documents if requested by the lender.

Offline: Carry physical copies to the branch.

Step 3: Complete Any Pending Payment

Clear any remaining outstanding amount, if applicable.

Online: Pay through net banking, UPI, or debit account instructions.

Offline: Pay through cheque, cash, or branch transfer.

Step 4: Submit Closure Request

Inform the lender that you wish to close the loan account.

Online: Raise a service request through internet banking or customer support.

Offline: Submit a written request at the branch.

Step 5: Obtain Closure Confirmation

Collect confirmation that the loan has been successfully closed.

Online: Download the closure confirmation from the portal or receive it by email.

Offline: Collect the acknowledgement letter from the branch.

Many lenders now offer online loan closure facilities through internet banking, mobile apps, or customer service portals.

The typical online closure process involves:

1. Logging into your loan account.
2. Checking the outstanding balance.
3. Making the final payment online.
4. Raising a closure request.
5. Downloading the loan closure confirmation and NOC once issued.

However, availability of online closure services may vary depending on the lender's policies.

1. In cases of pre-closure, the basic procedure remains the same wherein you inform the bank to check the outstanding loan amount for repayment.
2. Visit the bank with all the necessary documents such as ID proof, your bank passbook, account details, the necessary information regarding your EMIs and a cheque to clear the remaining dues if any.
3. Some banks levy penalty on pre-payment, which has to be settled along with the loan amount. Ask your lender about such charges.
4. Once you have completed all the formalities and closed your loan account, you will be issued an acknowledgement letter with the details of clearances by the bank. This should be preserved for any future references that might arise.
5. In some cases, you can also procure a No Dues Certificate (NDC) from the lender.

A No Objection Certificate (NOC) is an official document issued by the lender confirming that all loan dues have been fully repaid and no outstanding liability remains.

You should keep the NOC safely because it:

• Serves as proof of loan closure
• Helps resolve future disputes, if any
• Assists in correcting credit report discrepancies
• May be required when applying for future loans

It is advisable to retain both digital and physical copies for future reference.

Closing a personal loan responsibly can positively impact your credit profile. A successfully closed loan demonstrates repayment discipline and improves your credit history. However, the impact on your credit score depends on factors such as:

• Whether all EMIs were paid on time
• The overall mix of credit products in your profile
• Your total credit utilisation
• The number of active loans and credit cards

After closure, check your credit report to ensure the loan status is updated as "Closed" and not "Settled", as a settled status may negatively affect your credit score.

Closing your personal loan properly is just as important as repaying it on time. Whether you opt for regular closure or pre-closure, ensure that all dues are cleared, obtain your NOC, and verify that the closure is correctly reflected in your credit report.

If you need funds again in the future, you can explore a new personal loan from Aditya Birla Capital with a simple application process and flexible repayment options.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.