How to Close Personal Loan Early?

I’ve provided a step-by-step guide on how to close personal loan faster. You can go through the same.

How To Close Loans Faster?

• Review your loan agreement for any specific terms and conditions related to prepayment or foreclosure. Check for any lock-in periods or restrictions on early repayment.

• Many lenders charge a prepayment penalty, typically ranging from 2% to 5% of the outstanding loan amount. Ensure you are aware of these charges.

Obtain the current outstanding principal amount from your lender. This may be available on the lender’s online portal or by contacting customer service. Calculate the interest payable up to the date of prepayment.

Obtain the latest loan account statement to verify the outstanding amount and any pending dues. Keep a government-issued ID proof ready (e.g., Aadhaar card, PAN card, passport). Have a copy of the loan agreement for reference.

• Contact your lender to request details about the prepayment process, including the exact outstanding amount, applicable prepayment charges, and required documentation.

• Some lenders require a formal written request or an application form for prepayment. Ensure you complete and submit any required forms.

Ensure you have sufficient funds in your bank account to cover the outstanding principal amount, interest, and any prepayment penalties. Confirm with the lender the acceptable modes of payment for prepayment (e.g., cheque, demand draft, online transfer).

Follow the lender’s instructions for making the prepayment. Ensure that the payment is made through the approved channels to avoid any issues. Obtain an acknowledgment receipt from the lender for the prepayment.

• Request a No Objection Certificate (NOC) or No Dues Certificate from the lender. This document confirms that the loan has been fully repaid and there are no outstanding dues. Obtain a loan closure letter from the lender, which formally states that the loan account is closed.

• Ensure that the lender updates your loan closure status with credit bureaus (like CIBIL) to reflect the loan closure in your credit report.

Check your loan account statement after a few weeks to ensure that the account is closed and no further transactions are recorded. Review your credit report after a month to verify that the loan account is marked as closed. 

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I had taken a personal loan a few years back and now I was planning to close it early. As I wasn’t aware of the process, I asked a friend about how to close personal loan early. He informed me about the process and here are the steps he mentioned. 

Can I Close Personal Loan Early?

Early closing of personal loans is possible and here are the steps that you need to follow. 

• For closing personal loan early, my friend asked me to visit the bank branch from where I had taken the loan and carry the necessary documents. He also suggested that I carry my cheque as I might need to pay pre-closure charges. 

• After reaching the bank, I have to fill out a form or write a letter requesting pre-closure of the Personal Loan account.

• Following that, he told me that I needed to sign the required documents. 

• He suggested me to take an acknowledgment letter mentioning that the balance amount has been paid. 

According to my friend, once the applicable funds are received by the bank, the personal loan account will be closed automatically. 

He also told me about the documents that I needed to carry for preclosing my personal loan. Here are the documents

• Identity proof (Aadhaar card, Voters card, PAN card, Passport)

• Bank passbook

• Loan approval letter

• Loan account statement

• Pre-closure quote

• Cheque or demand draft for pre-closure.

And that was all that he told me about how to close personal loan early. I hope this helps.