Procedures to follow when closing a Personal Loan

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 tenor 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, 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 had availed. 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

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 (in case of 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 will need a Non-Objection Certificate (NOC) from the lender that will be a 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 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
• In some cases, a No Dues Certificate (NDC) may also be issued to you
  

Additional Read: Know The difference between simple interest vs compound interest

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.

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