2 min read
25 May 2021

How to close a personal loan early

Closing a personal loan account after paying back the amount in full should be at the top of your to-do list. You can do this either by repaying the whole amount over the tenure of the loan or prematurely closing the account before the due date. While the former is called a closure (or a regular closure), the latter, termed pre-closure or foreclosure. Foreclosure greatly reduces the debt burden, giving your credit score a facelift in the process as well.

Now, your responsibility doesn’t end with just settling the loan amount that you’ve availed of. For a complete closure, there are a few procedures to be followed, which you should avoid any unnecessary financial inconvenience in the future.

Additional Read: What is annual percentage rate (APR): Understanding how APR is calculated

What is the regular closure of a personal loan?

A regular personal loan closure is when the borrower pays and clears all the personal loan EMIs. The borrower must inform the lender to issue a no objection certificate (NOC) for the closure of the personal loan following the payment of the final EMI.

How do you make a regular closure?

  • After having paid back the loan amount in its entirety, approach the bank, and inform them about the same.
  • Carry identity proof, a cheque (if there’s any outstanding amount), and your loan account number. The desk will verify these documents before they proceed to close your loan.
  • Post due diligence, your loan account will be automatically closed. You’ll need a no objection certificate (NOC) from the lender that will be a testimony to the closure.
  • You can contact the bank’s help desk anytime.

Additional read: Personal Loan foreclosure

What is the pre-closure of a personal loan?

A personal loan pre-closure is when the borrower chooses to pay off the personal loan before the pre-determined tenure. When foreclosing the personal loan borrower will be responsible for paying the current month's EMI, outstanding loan balance, and foreclosure fees.

How to pre-close your loan account?

A pre-closure is when you repay the loan amount before the binding due date. You can follow the procedures listed below that will facilitate a neat pre-closure, devoid of any hassle.

  • Visit the lender where you had availed the loan from.
  • Take necessary documents along, including an identity proof, loan account number, bank passbook pointing at all EMI clearance. Also, carry a cheque to make the payment.
  • The lender might levy a foreclosure penalty, a charge that is mandatory (if imposed, that is) and needs to be settled along with the loan.
  • After settling the entire loan, the bank will issue you an acknowledgement letter mentioning the clearance details. Retain that for any future reference that may come up.
  • Sometimes, a no dues certificate (NDC) may also be issued to you.

Additional read: What is debt consolidation

Don’t forget or undermine the importance of closing your loan account, regardless of a regular closure or a pre-closure.

Bajaj Finserv offers pre-approved offers on a host of loans, including personal loan, business loan, and home loan. Check out your pre-approved offer by sharing a few basic details.

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. In case any inconsistencies observed, please click on reach us.

*Terms and conditions apply