Most pre-closing personal loans are short-term loans that last 60 months. You can choose how long the loan will last. Most lenders also have specific terms that make it easier for you to pay them early. If anyone is short on cash and needs to get through tough times, a pre-closing personal loan is one of the best options. The best thing about it is that you can use it for anything, unlike loans for cars or houses.
Interest rates on loans given right away can be anywhere from 11% to 35%. It depends on how risky the credit is and on other factors. You can close a loan if you want to take on less debt. The debt with the highest interest rate should be paid off first. Find out how to close personal loans early and the steps of pre-closing a personal loan.
What is Meant By a Personal Loan?
A personal loan is a type of loan a person takes for personal needs, such as paying off debt or investing in a company. A personal loan is also known as a consumer loan.
All personal loans include these three elements:
- Evidence of the debt, also known as a promissory note
- The loaned amount, also known as the principal
- Debts related to borrowing, also known as interest rates.
Once the loan’s repayment terms are met, the promissory note is revoked. If agreed-upon loan payments are not made, the lender may file a lawsuit to recover its money.
Mortgages for homes or cottages are included in consumer loans. However, personal loans are not a common term used to describe them.
Documents Required for Pre-Closing Personal Loan
- You can find the loan account number on the loan statement. By logging in, you can access online banking and see loan statements.
- Identity documents include a passport, a PAN, and an Aadhaar card.
- The loan account statement and the letter approving the loan are also important documents.
- Get an exact quote of how much someone owes for “late plus charges.” Ask the loan officer about any fees for paying off the loan early.
- To pay off a loan early, you must take a cheque made out to the bank where you got the loan and cash it.
How Much is the Pre-Closing Personal Loan Charge?
For pre-closing, a personal loan means paying off debt before the end of the loan’s term. Some lenders charge a fee for pre-closing the personal loan. But sometimes, a pre-closing personal loan can help lower interest rates and debt loads.
How to Close Personal Loan Early?
The process for pre-closing personal loans must be understood. Most borrowers wish to pay off the loan before the defined duration. But, the pre-payment process for pre-closing personal loans may vary from one lender to another.
Here are the steps for a pre-closing personal loan-
- You can contact your relationship manager through online banking to get the payment plan.
- You can use customer service to let the lender know that the loan has been paid off early.
- Before signing and sending the pre-closing personal loan form to the lender, carefully read the rules.
- If the documents are late or don’t have enough information, the lender will stop or cancel the early payment.
- You can pay with cash, a cheque, or a DD. After turning in all of the paperwork, a borrower will get a pre-closing quote.
- An authorised person can fill out the necessary paperwork. This can be done when you can’t go to the branch. You must give the authorised person a letter and proof of identification.
- When the loan is over, don’t forget to get the paperwork from the lender. It comes with the No Objection Certificate and the Loan Closure Certificate.
Different Types of Personal Loan Closure
There are a lot of ways of pre-closing a personal loan. It depends on what you want and how much money they have. Here are the main steps for pre-closing a personal loan early:
- Regular Personal Loan Closure
The loan is paid off when you make all EMI payments up to the last EMI. The lender will give you a No Objection Certificate and a Loan Closure Certificate. If it fits the loan terms, you can pay the EMI for as long as possible.
- Personal Loan Pre-Payment
Personal loans can be paid back in full or in part. Depending on the lender, pre-closing personal loan fees can be anywhere from 0% to 5% of the loan balance.
- Foreclosing a Personal Loan
For the loan account to be paid off early, the debt must be paid off at once instead of in regular payments. A foreclosure can be started by either the buyer or the borrower. It is a legal way for a money lender to get back the rest of a loan given to someone else.
Is Pre-Closing a Personal Loan a Good Option?
In many situations, pre-closing the personal loan is a smart move:
1. Helpful in lowering the debt load
You should choose the pre-closure of a personal loan based on your financial situation. If you are in a cycle of debt. Opt for a pre-closing personal loan if you want to come out from the debt cycle. Before choosing a personal loan, you must figure out how much money you will save and consider the fees and penalties for paying early.
2. Tracks the credit score
The credit score is unaffected by pre-payment and partial repayment of loans. Credit units and money lenders treat it as a loan paid back within the predetermined tenure. But, if you need a sufficient credit score history, paying the bills on time for a more extended period may help preserve or improve the credit score.
When you have sufficient money, pay your loans early. Salary workers often pay off personal loans before they close to get bonuses.
Even though paying off a loan is a relief, banks and NBFCs charge up to 5% of the total amount owed for a pre-closing personal loan. It is not worth it if you want to repay the loan early.
Before borrowing, plan its usage and payback. Private loans are worth looking into compared to other ways to get money. Look at what different lenders offer to compare the rates and terms of personal loans. See the fine print for details on costs and penalties.
It is wise to research the process of pre-closing personal loans before applying for a loan. To learn more, visit the Piramal Finance website and explore their products and services.