Loan Closure: Step-by-Step Guide, Charges, and Post-Closure Tips

Get the information about what is loan closure & get procedure to close your loan early.
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What is Loan Closure & how it Works for Close Loan
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3 min
30-October-2024

Loan closure marks the successful completion of loan repayment, ensuring no outstanding dues remain. It involves paying the final EMI or any remaining amount in full and receiving a No Objection Certificate (NOC) from the lender. Proper loan closure improves credit scores and ensures financial clarity. To complete the process, certain documents are required, and multiple methods like online, offline, or early closure options are available. Properly handling this ensures no legal or financial issues arise later. Understanding the right process and collecting the necessary paperwork helps in seamless loan closure.

Eligibility for loan pre-closure

  • Completed minimum lock-in period: Most financial institutions require borrowers to complete a minimum tenure—typically 6 to 12 months—before permitting loan pre-closure. This is applicable to both personal and consumer loans.
  • Full repayment capacity: The borrower must demonstrate the financial ability to repay the outstanding loan amount in one go, including any interest accrued up to the pre-closure date.
  • Timely EMI payments: A consistent record of on-time EMI payments is usually necessary. Delays or defaults may disqualify the borrower from pre-closure benefits.
  • No outstanding dues: All pending EMIs, penalties, or charges must be cleared before initiating the pre-closure process. Financial institutions will reject requests if dues remain.
  • Proper documentation: Borrowers must submit a written request for pre-closure along with ID proof, loan account number, and bank statements showing available funds for repayment.
  • Pre-closure charges: Depending on the lender’s policy, a nominal fee (usually 2% to 5% of the outstanding amount) may be applicable and must be paid to complete the process.
  • Approval from lender: Final eligibility is subject to the lender’s approval after verifying repayment history, account status, and compliance with internal policies.

Documents required for loan closure

When closing a loan, certain documents must be submitted to ensure a smooth process. These documents typically include:

  • Loan account statement: Showing the complete payment history.
  • Final EMI receipt: Proof of final loan payment.
  • No Objection Certificate (NOC): Issued by the lender confirming full payment.
  • Loan agreement: For reference and lender confirmation.
  • Property papers (for home loans): To get back from the lender if kept as collateral.
  • Identity proof: Necessary for verification.

Ensuring all documents are collected helps avoid any complications during the loan closure. It's essential to store them safely for future reference.

Methods to close a loan

Loans can be closed through several methods depending on individual preferences and loan type:

  • Online closure: Many lenders offer online portals where you can make the final payment and request NOC.
  • Offline closure: Visit the bank or lender in person, clear overdue EMIs, and collect the NOC.
  • Prepayment: Pay the outstanding loan amount before the tenure ends. Some lenders may charge a prepayment fee.
  • Auto-debit closure: The final EMI is deducted automatically, and the loan closes without manual intervention.

Before closing the loan, ensure there are no hidden fees, and confirm the receipt of all required documents from the lender.

Types of loan closure

Loan closure can be done through two primary methods: pre-closure and regular closure. Each method depends on the borrower’s financial situation and the loan repayment status. Understanding the right type ensures a smoother process and may even save on interest costs. Choosing the correct method should align with the loan's terms and conditions to avoid penalties or hidden charges.

Pre-closure

Pre-closure occurs when a borrower decides to repay the entire loan amount before the scheduled tenure ends. This method can reduce the interest burden, especially for long-term loans. However, lenders may charge a prepayment or foreclosure fee. It's essential to review the loan agreement for any such charges before opting for pre-closure. Some financial institutions offer online options for pre-closure, while others may require a visit to the branch. Learn more about the process of Loan Foreclosure.

Pre-closure is ideal for those with surplus funds and looking to minimise their debt burden early.

Regular closure

Regular closure refers to repaying the loan in full as per the agreed schedule, usually through equated monthly instalments (EMIs). The loan is considered fully closed when the borrower has paid the last EMI, and no outstanding balance remains. Upon regular closure, it’s crucial to collect a No Objection Certificate (NOC) and other relevant documents from the lender. Regular closure typically has no penalties or extra charges, making it a straightforward option.

Proper planning for loan repayment ensures timely payments and avoids any complications during regular closure.

How to close a loan in Bajaj Finserv?

Bajaj Finserv provides both online and offline methods to close a loan. The process involves clearing all outstanding dues, obtaining necessary documents like the No Dues Certificate and No Objection Certificate (NOC), and ensuring the loan is officially closed. Online methods are convenient, allowing borrowers to close loans from anywhere, while offline methods provide in-person support at branches or through customer care. Selecting the right method depends on the borrower's convenience and the type of loan they have.

Online methods for loan closure

Closing a loan online through your Bajaj Finance account is quick and straightforward. Follow these steps:

  1. Log in to your account using your registered mobile number on the Bajaj Finserv website or mobile app.
  1. Navigate to the loan section to view outstanding loan details.
  1. Select the option for loan closure and review the final outstanding amount.
  1. Make the full and final payment through the online payment gateway.
  1. After successful payment, request the No Objection Certificate (NOC) and No Dues Certificate.

Ensure to save these documents for future reference, as they serve as proof of loan closure.

How to close a loan offline?

Customer care support

To close a loan offline, Bajaj Finserv offers customer care support. You can call the customer care number and request assistance with loan closure. A customer service representative will guide you through the process, including the final amount payable and any necessary paperwork. Once the final payment is made through the available payment modes, you will be able to request the required documents like the No Dues Certificate and No Objection Certificate (NOC). Customer care can provide guidance on any further actions needed to ensure a successful loan closure.

Visit branch

Visiting a Bajaj Finserv branch is another offline method to close a loan. At the branch, you can meet a representative who will assist you with the loan closure process. Bring your identity proof and details about the loan to facilitate the process. The representative will provide the final outstanding amount for closure. After making the payment at the branch, ensure to collect important documents like the No Objection Certificate (NOC) and No Dues Certificate. Visiting a branch can be helpful for those who prefer in-person assistance and direct support during the closure.

Digital vs. Offline closure

Aspect

Digital Closure

Offline Closure

Process

Initiated through lender’s app or customer portal

Requires visiting the branch or customer service centre

Documentation

Uploads done online (ID proof, loan details, etc.)

Physical copies of documents must be submitted

Time taken

Typically quicker, completed within a few working days

May take longer due to manual processing

Convenience

Can be done from anywhere, 24x7

Limited to working hours and branch availability

Acknowledgement

Instant digital receipt or confirmation via email/SMS

Physical receipt provided upon completion

Support required

Minimal, with online guidance or chat support

Involves face-to-face interaction with staff

Suitability

Ideal for tech-savvy customers with internet access

Suitable for those who prefer personal assistance

 

Conclusion

In conclusion, closing a loan, whether online or offline, is a vital step in ensuring all financial obligations are met. Bajaj Finserv offers convenient options for both methods, allowing borrowers to choose according to their preference. It’s essential to follow the correct process, make the final payment, and obtain key documents like the No Dues Certificate and No Objection Certificate (NOC). Proper loan closure not only clears liabilities but also positively impacts credit scores and ensures peace of mind. Always keep the necessary documents for future reference and to avoid any issues later.

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

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Frequently asked questions

Is part-payment allowed before pre-closure?

Yes, most lenders including Bajaj Finserv allow part-payment before opting for full pre-closure. This reduces the principal amount, lowering overall interest liability. However, terms vary by product type, and part-payment may be restricted during a lock-in period or involve additional charges as per the loan agreement.

Can I negotiate pre-closure charges with Bajaj Finserv?

Pre-closure charges are usually predefined in the loan agreement, but customers may request waivers or reduced charges under special circumstances. While not guaranteed, Bajaj Finserv may consider negotiation based on the customer's repayment history, loan type, and tenure. It is advisable to speak directly with customer service.

Does loan closure affect my credit score?

Yes, successful loan closure positively impacts your credit score, especially if EMIs were paid timely. It reflects financial discipline and lowers your credit utilisation. However, abrupt closures or pre-closures early in the tenure might slightly reduce your score due to reduced credit history length, but the effect is minimal.

Do NRI customers face extra charges for pre-closure?

Generally, NRI customers are subject to the same pre-closure policies and charges as resident borrowers. However, they may incur additional remittance or currency conversion charges depending on their bank. It’s advisable for NRIs to check specific terms with Bajaj Finserv and their home financial institution beforehand.

How is the outstanding amount calculated for pre-closure?

The outstanding amount includes the remaining principal balance, accrued interest until the pre-closure date, and applicable pre-closure charges. It excludes future unpaid EMIs. A final statement is issued by the lender upon request, detailing the exact amount to be paid for settling the loan in full.

How long does it take to update my credit report after closure?

Once the loan is closed, the lender typically notifies credit bureaus within 30 days. However, it can take up to 45 days for the closure to reflect on your credit report. It’s advisable to check your report after a month and raise a dispute if it's not updated.

Can I reopen a closed loan account?

No, once a loan account is officially closed, it cannot be reopened. If you require additional funds, you must apply for a new loan. Some lenders, like Bajaj Finserv, may offer pre-approved or top-up loans based on your previous loan history and repayment performance.

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