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Personal Loan Preclosure Procedure

Personal loans can come in handy in the situations of dire financial need such as emergency health treatment, house repair, wedding, etc. However, when you have surplus money in hand, you should consider pre-closure of your personal loan and be free of it.

Most banks allow you to pre-close a personal loan by paying the outstanding amount, any time after six installments. However, pre-payment penalty is charged on doing so.

Personal loan Pre-closure Process

Pre-closure of personal loan may not be a herculean task. However it is important that you understand the process right when you are taking a personal loan from a bank, as it may differ from one bank to another.

Some of the basic steps you can follow while pre-closing a personal loan are:

  • Personal loans cannot be pre-closed online, therefore you are required to find the nearest bank branch, where you can pre-close your loan. You can call the bank’s customer care number to find the branch next to you.
  • When you visit the bank, you can contact a bank executive in the loans section to help you by explaining the process of pre-closure, if you do not already know. Once you are aware of the process, you can request for a pre-closure form.
  • Read the form carefully and fill all the loan details and personal details required in the form. Sign the form after you have completed filling the form without any blank spaces.
  • You are also required to submit a set of documents for pre-closing your loan. Some of the documents required are:
    • Identification proof such as Passport, Driving License, or Aadhar Card.
    • Loan documents.
    • Bank statement reflecting the payment and clearance of the last EMI.
    • Pre-payment statement, which you can avail by requesting with the bank. It can be sent to you either online or via post.
  • Once all documents are submitted, you can make the payment through cheque, demand draft, or cash.
  • If due to some reason, you are unable to visit the bank on your own, you can send a representative to do so, on your behalf. However, your representative should carry an authority letter duly signed by you. He or she should also carry all the required documents, along with:
    • Loan applicant’s identification proof such as PAN Card, Passport, Driving License, or Voters ID).
    • Authorisation letter from loan applicant.
  • After following all the steps, the bank will give you an acknowledgement letter which must be saved carefully.
  • The final closure of the loan agreement is sent to you in a few days after closure of the loan.

Clearing off personal loans gives a mental boost as it relieves the financial burden that you carry every month. Calculations may help you decide whether paying off a personal loan early is a good idea or not, however it is your individual choice if you want to save your money on interest or get back your peace of mind.

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