Things You Must Know While Closing a Personal Loan

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Introduction

A personal loan is an immediate financial help that you may get by contacting various financial institutions that will facilitate you with a personal loan whose limit and the interest rate is variable for individuals. This is because the credit score secured by various people is different and depends on a number of factors. As compared to business loan or another form of loans the interest rate for the personal loan is quite higher as it is an unsecured loan. Closing a personal loan is usually a priority for those who are paying the monthly installments on which an interest rate is levied. A lot of facts must be known before you close the personal loan.

Procedure For Closing Loan

The personal loan can be closed in two ways. Either you repay the loan in the form of easy monthly installments until the full payment of base and interest amount. Another way of closing a loan is to pre-close the loan by paying the sum left in one single payment as this will provide immediate relief from the burden of the loan as now onwards the payment of monthly installments will end. Closing the loan is not so simple, a set procedure needs to be followed keeping in mind a lot of things so that no trouble is encountered after repayment of loan amount.

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Regular Closure Of Loan

Regulatory authorities set up the loan closure procedure in order to safeguard the customer against any violation of his rights by the financial institution from whom he has taken the loan. Frauds encountered by the customers even after the complete payment of the loan to the bank or the financial institutions was also the main reason behind the setup of this procedure. The loan closed by the financial institution upon successful completion of the entire tenure is generally termed as regular closure of loan.

Once you completely pay the loan amount, you need to follow a procedure in order to ensure that the loan has been closed. The first and the prime step to be taken by the customer after he has fully paid the loan amount is to report the bank or financial institution about this and ask them to provide assistance in order to start with the necessary formalities required for the closure of the bank account. After a meeting has been fixed with the bank officials’ next step is to get yourself verified.

Remember to carry an id proof along with you so that bank can verify your identity in order to close the loan. After successful verification, your loan will be closed automatically. Do not forget to avail any no objection certificate from the bank which states that full amount of loan has been paid by the borrower and no outstanding dues are there. This proof will safeguard you against any fraud or false claim by any bank official or other institution about your loan status. Another benefit that it provides is it improves your credit score and in future, you will be benefited with loans of the sufficiently high amount and considerably low-interest rate.

Pre Closure Of Loan

In case the borrower repays the outstanding debts of his personal loan before its tenure has ended is generally termed as its pre-closure. Borrowers feel a great burden of the loan and in order to get relief from scary monthly installments, they try to repay the full amount to the financial authorities in a single payment in order to pre-close the loan. Pre-closing a loan is not that easy and is a tough decision to be made as most of the institutions charge heavy pre-closure penalties that are usually quite high and then tax on this penalty is also recovered from borrowers only, making the decision more difficult to be made.

Considering the relief of being debt free, that pre-closure of loan provides the borrower is sometimes a significant factor and is generally more important for the borrower’s mental health and a decision is made by him to repay the loan amount. There is a procedure set by the concerned authorities to be followed by the borrower in order to close the loan after complete payment. Through this, the borrower is declared debt free by the financial institution and a confirmation against the amount paid by the borrower in order to settle the loan is also generated.

The initial step is always the same and is to schedule a meeting with the bank or financial institution and visit them on the day decided in order to discuss the matter and initiate the procedure for bank closure. Carry your identity proof along with you and produce them in front of the bank in order to verify your identity. The lender usually charges a hefty penalty from the borrower which has been already declared in the terms of the loan before it is issued. Once you pay all the debts through any payment source, the bank provides you with an acknowledgment and the agreement of loan is sent to you upon successful closure of the loan.

Conclusion

Any kind of loan taken by the follower needs to be closed in agreement with the lender by complete repayment of the loan amount. Before you decide to close the loan within or at the end of the tenure, you need to be aware of some facts that will ensure that your rights are not violated by the lender and you do not experience any financial loss or fraud in closing the loan. The procedure is generally very simple and requires the borrower to go to the bank, get his identity verified and make a payment against the outstanding debts. After this, the lender provides you with a NOC or agreement and you declare debt free in all terms.

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