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Paid off all the EMIs on your Personal Loan? Here’s How to Properly Close a Personal Loan 

We all are aware of the high interest associated with a personal loan. If you are a salaried class individual, you should take enough effort to reduce your financial burden. So, now that you have reached that stage where you have paid off all the EMIs and are done with ICICI personal loan payment given on your personal loan contract or ICICI personal loan status, you should know that paying off your debt is not the only step in closing a personal loan. In actuality, it goes beyond that. While doing so, a few crucial factors must be taken into consideration. Here is a brief overview of some of the most crucial points you should bear in mind when closing a personal loan. 

Preclosure Terms and Conditions: When closing a personal loan by paying  ICICI personal loan payment, the first thing to consider is if the loan’s terms and conditions allow you to do so. A waiting time of sorts is often imposed by banks and other financial institutions, during which you are not allowed to close a personal loan. This time frame is typically set at 12 months from the loan’s application date. Having said that, you can apply for the closure of your personal loan right away after the 12-month time has passed. The  ICICI personal loan status and other such details can be checked on the application itself. In order to streamline the procedure, it is advised to first review the terms and conditions to determine whether you are eligible for loan preclosure or not.

Submitted Documents for Closure: Just paying the ICICI personal loan payment due on a personal loan might not always be sufficient to close it. To start the loan closure process, the financial institution may ask you to submit specific documentation. Therefore, it is vitally crucial to prepare all necessary paperwork before really requesting closure. For instance, you might be required to send a letter asking for the loan to be closed along with other paperwork, including a check for the remaining loan balance and verification of your identity.

Charges for closing a personal Loan: For paying off an ICICI personal loan payment before the agreed-upon term, banks and other financial institutions nearly always charge pre-closure fees. These fees are typically stated as a percentage of the entire amount of the outstanding loan. It typically varies from 1% to 5% of the total amount of outstanding loans. Therefore, before moving in for pre-closure, you would need to bear this in mind. Say you wish to foreclose on the loan after 24 months. The foreclosure charges will be based on the remaining principal balance.  

Loan Closure Document: This is among the most crucial considerations you should make before finalizing a personal loan. A letter or recognition from the financial institution certifying the loan closure must be obtained without fail and the same should be reflected in  ICICI personal loan status, regardless of whether your personal loan is being pre-closed or you have reached the end of your EMI payment term. This one piece of documentation essentially serves as confirmation that you closed your personal loan account by paying off all outstanding debt. The loan closure document might protect you from negative legal and financial repercussions in the event of any upcoming disputes.

Your Credit score: Do you know there is a reason why you should keep your credit score in mind while closing a personal loan? In general, the financial institution has a responsibility to inform the credit bureaus when you end a personal loan account by paying the ICICI personal loan payment, and they will subsequently update the information in their records and the same closure of loan amount will also be reflected in your  ICICI personal loan status. The reporting procedure can occasionally be delayed for a number of reasons, though. If there is a delay, your credit score might not be updated in a timely manner, which might ultimately prevent you from applying for a new loan. The good news is that you can avoid this by checking your credit score both before and after you’ve paid off your personal loan to make sure it has been updated. If you find that your score hasn’t been updated, bring it to the notice of the financial institution immediately. 

While finalizing a loan, these few considerations must be kept in mind.

  • As it must be evident in your books prior to the closure, always ask your financial advisor for assistance in accounting for the source of funds utilized for closure.
  • Get a NOC from the lender next to confirm that all payments have been made on time and that the loan has been concluded properly without any outstanding balances or pending litigation.
  • Getting all of the original paperwork you supplied while applying for the loan is a crucial next step.

In the event of a foreclosure, the borrower is required to notify the bank, inquire about any foreclosure penalties (which can range from 1% to 5% of the outstanding

  • balance), and make sure all original documentation is in order. 
  • The borrower must make sure that their CIBIL score is updated, which typically takes some time to complete. Failure to do so could make future borrowing challenging and expensive.
  • There should be no claim on the collateral by the bank or NBFC, and all documentation and deeds should be in the borrower’s name. For both parties engaged in the process, these simple measures can make the loan closing process hassle-free. 

Conclusion

We, Individuals, do our complete research when selecting the lender from which one should avail personal loan but when it comes to foreclosing their personal loan, we do not check beyond. As a borrower, you should be careful at the time of foreclosing your personal loan to avoid future inconveniences and to maintain a healthy credit score as well. These are the top considerations that you ought to make every time you close a personal loan. 

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