The personal loan is one of the most common credit options. The quick disbursal, unsecured nature and multipurpose nature of the personal loans makes it one of the most, if not the most lucrative credit option. Personal loans are unsecured as to avail this loan an individual is not required to pledge anything against this credit option. The unsecured nature of the personal loan makes it a quick disbursal loan as the banks and financial institutions are not required to spend time on the security be it home, property or any other such security.
Personal loans are multipurpose loans, the term multipurpose here implies that the credit from personal loans can be used in multiple ways. Individuals can use it to buy a sophisticated gazette, give wings to their dream of further education or travel, can finance an extravagant wedding and several other reasons.
Now that we have understood what personal loans are let us, deep-dive into foreclosure and prepayment of the personal loan personal loans about which most people are quite sceptical.
What is preclosure of a personal loan?
There is no denying the fact that irrespective of how lucrative the personal loan appears the cost incurred in the form of interest on a personal loan is way too much. The rate of interest on the personal loan lies in the range of 14% to 24% and this makes the credit option way too expensive. Thus, it is advisable to close the loan early to save the extra amount to be paid in the form of interest.
However, there lies a caveat; Personal loans involve a cost for pre closing, so the cost is more the eventual interest to be paid then there is no point in pre closing the loan.
Types of personal loan closures
Now let us understand the types of pre-closure:
- Regular personal loan closures: As the name suggests, regular personal loan closure is when an individual clears all the EMIs according to the pre-decided time of the loan. And following the payment of the last EMI, the individual has to ask the bank to issue the No Objection Certificate for the closure of the personal loan and finally the loan closure certificate.
- Personal loan part payment: If an individual is willing to reduce the monthly instalments and the tenure of the personal loan, he can choose a personal loan part payment. The part payment amount will be dependent on the terms and conditions as set by the bank or financial institute.
- Personal loan pre-closure: A personal pre-closure is when the individual decides to close the personal loan before the particular repayment tenure. Usually, an individual can choose a personal loan pre-closure after a year or payment of a minimum of 12 EMIs. When foreclosing the loan, an individual will have to pay the equated monthly instalments of the month, any outstanding dues if there are and the foreclosure fees.
Personal loan Pre-closure Process
Pre-closing the personal loan is not at all a tall order. In fact, it is a cakewalk. However, a person should know the preclosure process to pre closing is as follow:
- There is no such facility of pre-closing the loan online, so an individual is required to reach the nearest bank branch to close the loan.
- Individual may connect with the branch office if he is not aware of the preclosure process. And take the required form.
- Read and fill the form with utmost diligence.
- An individual is also required to submit relevant documents for pre-closing your loan. Required documents are:
- Identity proof
- Loan documents
- Bank statement about the payment and clearance of the last Equated Monthly Installments
- Prepayment statement, which an individual can avail by requesting with the bank. It can be sent either online or via post.
- After the above process is completed, the individual can submit the money via cheque, draft, online etc.
- The bank and financial institution will send the acknowledgement letter reading the foreclosure.