3 types of personal loan closures you must know
A personal loan is a credit contrivance offered by banks and financial institutions, without mortgaging an asset to guarantee the repayment. In comparison to other kinds of loans, the difficulty level of getting an instant personal loan approved is much higher. An instant personal loan can be used as an immediate helping resource for any urgent or unforeseen requirements. Since a personal loan doesn’t come with an end-use criterion unlike many loans, it can be easily used for a multitude of purposes such as home renovation, wedding, vacation, education, medical emergencies, and much more. With constant digitalization, now you can apply for a personal loan instantly online, without any hassles of visiting the bank for the same.
The current interest rate on instant personal loans ranging anywhere between 11.25% to 35.1%. These rates are primarily decided by the lending institutions based o your creditworthiness (credit score), income amount, and other liabilities that are being serviced by you. To ease up your debt burden or financial burden for that matter, closing a personal loan should be on the priority list. This ensures that the weight of repayment doesn’t keep piling up or remain unattended for more extended periods.
There are several modes of repayment available for instant personal loans. Several banks these days facilitate their customers with an option to repay their loans prior to the tenure period specified in the loan agreement. Still, some banks do not permit part-payments at all. So, ensure that you have absolute clarity on the terms and conditions before availing for a loan. Following are the different kinds of closures available for personal loans:
Regular Closure of Personal Loan
When a person closes the personal loan post completion of the entire tenure, it is known as regular closure. Once you have completely repaid the personal loan, you can follow a few procedures for closing the instant personal loan you had applied for from the bank.
- Once you have cleared all your monthly loan EMIs, it is the safe practice to contact the bank and cross-check whether all the outstanding has been made. For instance, you may have some penalty due to late payment, or other outstanding charges on your loan in case you had missed out on paying some EMIs on time. So, confirming with the bank that there are no exceptional charges is a smart option before closing the loan account
- If everything is clear, you can establish a date when you would want to complete the other formalities required for the closure. Generally, if everything is in place, the bank sends across the closure certificate either through post or email
- While going to your lending institution, it’s mandated to carry your ID proof, the account number for the loan, and a cheque in case any amount is required to be paid. The bank will be verifying these documents and the loan account prior to proceeding with the closure
Note: You can call the customer care number as well to seek help while closing your instant personal loan.
Repay your instant personal loan with clarity on the three types of loan closure options available
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Pre-Closure of Personal Loan
The process of paying back the entire amount loaned before the tenure period ends is called pre-closure or prepayment. Pre-closure helps lower the interest rate along with the debt burden. Given below are the ways involved while pre-closing the instant personal loan that had been availed.
- Before going in for a pre-closure, go through the penalty clause and do a rough evaluation of the perks that you can accrue by going for it. The thumb rule is the earlier you figure this out during the loan tenure period, the more beneficial it is. However, different banks have a different set of rules for pre-closures and penalties. Ensure that you know them and not make any hasty decision here
- You are required to carry the requisite documents such as ID proof, bank statements that men
- tion the clearance of previous EMI, loan account number, and a cheque for prepaying your entire loan
- The lending institutions generally charge a specific penalty from the loan amount that must be paid along with the prepayment
- After making the prepayment, the bank sends across an acknowledgment letter that needs to be kept for future references.
- Post completion of all the steps, the bank sends out the loan agreement, a few days after the closure of the instant personal loan
Part Prepayment of the Loan
There are certain instances when you may receive a windfall gain from some other source that you can put to use for paying off your loan. However, this amount may insufficient to pay off the entire loan. In this case, you can opt for part-prepayment of your instant personal loan.
There may be some penalties involved in part prepayment of the loan. Banks may also prohibit frequent part-prepayments and may permit only a limited number of them. These conditions are different for different lenders, so it is smart to corroborate with them before opting for a part prepayment