What is The Best Way to Pre-Close a Personal Loan?

A personal loan is a useful option when you’re in dire need of funds. After taking the loan, you will look to start repaying your loan and clear all dues. The usual way to repay your loan is by paying monthly EMIs until the tenure of your loan is reached. However, if you have additional funds, you can always look to repay your loan much before time and clear the loan long before the tenure is up. This is called pre-closure of a loan .

1. Regular Personal Loan Closure Your personal loan is closed when you pay all your EMIs. After you pay the final instalment, you must communicate the same to the lender and ask them to issue the No Objection Certificate and the Loan Closure Certificate.
2. Personal Loan Pre-Closure If you have surplus funds and you decide to pay all of your loan dues and close the loan before the set tenure, it is termed as loan pre-closure. Most of the time, lenders allow pre-closure of a personal loan after payment of 12 EMIs. When closing the loan, you have to pay all outstanding dues, along with the foreclosure fees.

Even though you can start the pre-payment process by contacting your lender, it is good to know the basic steps before you do so. The exact process may vary from bank to bank. Step 1: To begin foreclosing your loan, you must first visit the lender’s nearest branch. A personal loan pre-closure cannot be done online, and hence you will have to visit your lender’s offices for the same. Step 2: At the branch, contact an executive at the loan section and find out the process for loan foreclosure. Step 3: Request for a loan foreclosure form, read it carefully and fill it accurately. After filling the form, duly sign it. Step 4: Along with the form, you’re required to submit the following documents:

1. ID proof like passport, driver’s license, Aadhar
2. Loan documents
3. Bank statement
4. Pre-payment statement

Step 5: Once you’ve submitted all documents, you’ll be required to pay the foreclosure fees by cheque, demand draft or cash. Step 6: If you’re unable to visit the branch personally, you can send a representative on your behalf with e all the documents and an authorization letter. Step 7: After your foreclosure application, the lender will give you an acknowledgement letter. Step 8: You will then receive the final loan closure agreement in a few days.

You can also reduce your EMI and tenure for a personal loan by paying part of the loan amount. The amount to be paid varies and depends on the terms and conditions set by the lender.

These are the ways by which you can close out your loan and breathe a sigh of relief since a loan closure is always a freeing experience. Banks take pre-closure charges for personal loans if you want to close out the loan before the tenure period. Hence, it is always advisable to find out the foreclosure fees even before you take the loan.

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.