Federal Bank gives its customers the option of pre-closing their personal loans before the end of the loan tenure by paying a nominal penalty of up to 3% of the loan balance that is outstanding. The lender offers an easy and hassle-free loan pre-closure procedure. That said, it is important to be well aware of the terms and conditions of your loan before you pre-close it.
Federal Bank Personal Loan Pre-Closure Charges
The fee that you will need to pay when pre-closing your loan will vary based on the type of loan you had borrowed. Listed below is Federal Bank’s schedule of charges that may be applicable when pre-closing your loan:
|Type of Loan
|Floating rate loans to individuals
|Fixed rate loans to non-individuals (overdraft)
||3% of the outstanding loan balance or the DP
- Fixed rate period: 3% of the outstanding loan balance or the DP
- Floating rate period: Nil for term loans to individuals; 3% of the outstanding balance or the DP for overdraft loans to non-individuals
Requirements for Federal Bank Personal Loan Pre-Closure
- Lenders allow pre-closure of loans only after a certain waiting period has been completed from the date of loan disbursal. Therefore, check the rules of loan pre-closure.
- It is recommended that you visit the lender’s branch or contact the lender’s customer service team to know your pre-closure quote. Once you know exactly how much you are required to pay to the lender, you can arrange for the necessary funds to repay the outstanding loan amount.
- Make sure to contact the lender’s customer service team to know what documents you will need to submit to pre-close your loan. You can expect the lender to ask for your personal loan account number, proof of identity (passport, Aadhaar card, PAN card, etc.), and other loan-related documents such as your loan account statement and loan approval letter.
How to Pre-Close Your Federal Bank Personal Loan
- Visit the nearest branch of the lender. Ensure that you carry the required documents and cheque for the payment of the outstanding loan balance with you.
- You may have to submit a letter requesting the bank personnel to pre-close your loan amount.
- Next, hand over the cheque to the representative, along with the required documents.
- Make sure to collect the No Dues Certificate (NDC) from the lender. This certificate acknowledges that you have repaid the outstanding loan amount in its entirety.
- Once this is done, you can check to see if you need to complete any other formalities with the lender.
- Once all the pre-closure formalities have been completed, your personal loan account will be closed.
Things to Ensure When Pre-Closing a Personal Loan
- At the time of borrowing a personal loan, your lender will furnish you with a few documents. Ensure that you keep these documents in an accessible and safe location since you will need to provide these documents to your lender to pre-close your loan.
- Make sure to contact your lender well in advance to familiarise yourself with the personal loan pre-closure process.
- Ensure that you take the pre-closure fee and taxes into account when working out how much you will need to repay to pre-close your loan.
- When your lender computes the final assessment of the payable loan amount, ensure that you are physically present to verify the details.
- Once your loan account is closed, you will receive an acknowledgement letter/No Dues Certificate from the lender. It is in your best interest to retain these documents for future use or reference.
Although you may have surplus funds available to pre-close your loan, ensure that you check the cost of the loan and compare it to the returns that you may be able to earn if you were to invest the surplus fund. If you find that investing the surplus funds will yield higher returns, it is best to continue repaying your EMI and invest the sum that you have in hand.
Pre-closing your personal loan is the right thing to do if paying EMIs on a monthly basis is becoming a hassle and a financial burden to you, provided that you have the required funds in hand. Keep in mind that even if you are not able to prepay the entire outstanding balance all at once to pre-close your loan, you can make part-payments towards your loan. This will help reduce the outstanding loan balance, which will, in turn, reduce your payable EMIs. Regardless of what option you choose, ensure that you are well aware of any clauses that the lender may have specified in your loan agreement.