What is personal loan foreclosure?
You might have opted for a personal loan due to various reasons. For renovating your home, wedding expenses, to pay hospital bills or any other personal expense. However, when it comes to repaying your personal loan, you can either choose to pay with the EMI schedule or pre-close/ foreclose your personal loan. When you choose to close your loan earlier, it is called pre-closing or foreclosure of a loan. By pre-closing your personal loan, you can save on interest costs and have a good impact on your credit score.
Types of personal loan closures
1. Regular closure
When you make regular payments as per your repayment schedule, through EMIs, it is called regular closure. With a regular closure, you make no advance payments and close the loan as per the closure time mentioned in your repayment schedule.
2. Pre-closure (Prepayment)
Pre-closure of your personal loan is when you pay off the entire outstanding loan amount before the end date mentioned in your repayment schedule. You can do this in order to save the interest costs. Pre-closure is of two types:
- Full pre-closure: Full pre-closure is when you pay the entire outstanding amount before the scheduled end date.
- Part pre-closure: Part pre-closure is when you choose to make a lump-sum payment towards your loan, which will reduce the overall tenure and your interest rate.
3. Foreclosure
Foreclosure is another term that is utilised for the pre-closure of your personal loan. It specifically refers to paying off the entire outstanding loan amount before the scheduled end of the loan term. "Foreclosure" is used widely by the finance industry to emphasise that the loan account is completely closed ahead of its schedule.
Documents required for pre-closure
To preclose your personal loan with Bajaj Finserv, you will typically need the following documents:
- Loan account statement: This helps in understanding your total outstanding loan amount.
- Proof of identity: You will be required to validate your identification proof
- Preclosure request form: You can download this from her
- Please note: This form is only required if you are making a request offline.
If you are making a preclosure on the app or web, it is likely that you will not require these documents.
How to close a personal loan early?
If you wish to close your loan before the scheduled date of closure, here are some tips that might come in handy:
- Pay your EMIs in Advance: Depending on the type of your personal loan, you can choose to repay a certain number of EMIs in advance. This will help in reducing the EMIs and subsequently help save interest costs.
- Make lump-sum payments: This is like paying advance EMIs but instead of EMI amounts, you pay off a certain part of the outstanding amount.
- Foreclose your loan: In case you have excess funds available and you decide to close your entire outstanding loan amount, you can do so and preclose your personal loan.
To preclose your loan, please follow the below-given steps
To make the preclosure, you can follow these simple steps by logging in to your account:
- Go to 'Your relations’ and select your loan account
- Click on 'Make Payments'
- Choose 'Part-prepayment' as your payment option
- Enter the required details and proceed to pay
Additionally, you can visit the nearest Bajaj Finance Branch if you want to make a partial payment using a cheque or demand draft.
Note: Please deposit the cheque in favour of Bajaj Finance Ltd. The cheques and demand drafts clearance process will take up to 3 business days.
Impact of personal loan preclosure
Preclosing your personal loan has several positive impacts such as:
Saving interest:
Preclosing your loan before schedule allows you to save the interest payments. This can boost your savings.
Improve credit score:
If you choose to preclose your personal loan, it will improve your credit score since it will prove lenders that you are an excellent borrower.
Debt relief:
Paying off a loan earlier will provide a sense of financial relief. It reduces your monthly financial obligations, freeing up your cash flow for other expenses or investments.
Increase financial security:
Once your loan is paid off, you can use your freed-up cash flow to build investments that can give you returns. This will help you achieve financial security.
Preclosing charges for a personal loan
When you opt to preclose your personal loan, there is a nominal charge that is usually applied to the outstanding amount. In comparison to the interest amount that you will be paying as per the scheduled closure, this amount is extremely nominal ranging between 3 to 5%.
To learn more about the preclosing charges for your personal loan, please click here
NOC for personal loan foreclosure
No Objection Certificate (NOC) is a legal document stating that you have cleared all your dues with your lender and that they have no problem with you opting for a loan from another lender or opt for another loan from the same lender.
Once your loan is preclosed, please ensure that you initiate the process to get your NOC.
