04 July 2024 | By INDIE
A personal loan can be a strategic move to manage your finances, whether it's meant to consolidate a debt, finance a wedding, or cover emergency expenses. However, the closure of this loan is as significant as its acquisition. Properly closing your personal loan not only signifies financial relief but also bears significant implications for your credit health and future financial opportunities. Here’s the basics of why and how to close your personal loan.
A personal loan should be properly closed for several reasons:
Clearance of Debt: It removes any outstanding debts, freeing up your credit limit and reducing financial stress.
Credit Score Improvement: Completing loan payments on time can boost your credit score. Conversely, any discrepancies in closure can negatively impact it.
Future Financial Opportunities: Closure of a loan reinstates your eligibility for future loans. It shows potential lenders that you are responsible when it comes to loan repayments.
Reduced Financial Burden: No more monthly EMIs, which frees up your income for other investments and expenses.
Also Read: When to use Line of Credit and When to Avoid it
These are the broad steps you can follow to close your personal loan.
Before you visit the bank to close your personal loan, ensure you have all the required documents:
Personal Loan Account Number: Usually available in your loan statement or via online banking.
Identity Proof: Any government-issued ID like PAN card, Aadhar card, or passport.
Loan-Related Documents: Approval letters, loan statements, etc.
Many banks charge a pre-closure penalty. Here are the typical steps involved:
Check for Pre-closure Charges: Confirm any applicable pre-closure charges or penalties with your bank.
Prepare Payment: Arrange a cheque or draft in favour of the bank for the outstanding amount. Avoid cash payments.
Follow these steps at your bank:
Formal Request: You might need to fill out a form or submit a written request for loan pre-closure.
Payment: Pay the pre-closure amount and sign any required documents.
Obtain Acknowledgement: Always get a receipt or acknowledgement for the balance amount paid.
After the payment is made, ensure you receive a loan closure certificate or a no-due certificate from the bank, which confirms that there are no outstanding amounts on your loan.
After closure, check your credit report after a month to ensure that the loan account is marked as closed. Your credit report reflects your financial status and reliability, so ensure that it reflects your correct status.
Checklist Item |
Details |
Account Number |
Required for identification of your loan account. |
Identity and Loan Documents |
Essential for verification purposes. |
Pre-closure Charges |
Confirm any fees or penalties for early closure. |
Payment Method |
Prepare cheque or draft, avoid cash. |
Formal Closure Request |
May need to fill a form or provide a written request. |
Loan Closure Certificate |
Proof that your loan is fully repaid and closed. |
Credit Report Check |
Ensure your credit file is updated to reflect the closure. |
Personal loans can serve several purposes. To maintain your credibility, it is essential that you close them at the right time and in the right manner. Proper closure of your personal loan sets a positive financial track record and opens new avenues to manage your finances. You can consult your lender to understand the details.
Once your personal loan is closed, managing ongoing finances becomes crucial. Credit line by INDIE offers a flexible solution, especially for those who require continuous access to funds. With a credit line, you can draw funds as needed, and pay interest on the amount utilised, all while experiencing flexibility and convenience.
Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
