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Procedures to Follow When Closing a Personal Loan

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Procedures to Follow When Closing a Personal Loan

Procedures to Follow When Closing a Personal Loan

  • Highlights

  • Closing loan account on the due date is called regular closure

  • Closing the loan account prior to due date is pre-closure

  • Inform the bank of the type of closure

  • Ask for NOC (for regular closure) and NDC (for pre-closure)

Closing a personal loan account after having paid 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 tenor of the loan, or prematurely closing the account prior to the due date. While the former is called a closure (or a regular closure), the latter, termed pre-closure or foreclosure, greatly reduces the debt burden, giving your credit score a facelift in the process as well.

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

Additional Read : What is Annual Percentage Rate (APR): Understanding How APR Is Calculated

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 an identity proof, a cheque (in case of any outstanding amount) and your loan account number. These documents will be verified by the desk before they proceed to close your loan.

- Post due diligence, your loan account will be automatically closed. You will need a Non-Objection Certificate (NOC) from the lender that will be testimony to the closure.
- You can contact the bank’s help desk any time.

Additional Read: Personal Loan Foreclosure

How Do You Make a Pre-closure of 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 a proof of identity, loan account number, bank passbook pointing at all EMI clearance and finally a cheque for pre-paying the amount.
- 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 having settled 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.
- In some cases, a No Dues Certificate (NDC) may also be issued to you.

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Additional Read: What is Debt Consolidation

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

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DISCLAIMER:
The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.
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