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PERSONAL LOAN PRECLOSURE - AN EASY GUIDE
A personal loan is an unsecured loan that’s given without any collateral or security. Being easily accessible, an individual can easily get a personal loan with minimal documentation. You can also apply for a personal loan online from any reputed bank or NBFC.
NBFC: Non-Banking Financial Institution
What is Preclosure of a Personal Loan?
Preclosure of a personal loan is when the borrower repays the loan before the end of the loan tenure. This pertains to the principal amount of the loan. Loan preclosure can help the borrower save a lot of money. So, if you can afford to pay off the loan before the tenure ends, then always consider that.
Having said that, it is important that you read the loan agreement carefully and understand all the terms and conditions of preclosure. You can also consult your lender in case you have any queries related to the preclosure of the loan.
Mentioned below are the important aspects to consider before you start the personal loan preclosure process:
- Most lenders charge a small fee to process the preclosure of the loan, the charges of which can vary between 2-6 per cent of the outstanding principal amount.
- Some lenders have lock-in periods before which the lenders can pay off the loan. These lock-in periods can be for a few months or a year.
- You will have to calculate the total number of EMIs remaining to pay off the loan. This way, you will know exactly how much you need to pay for the preclosure of the loan.
- Sometimes the lenders might waive off the preclosure fee due to some seasonal offer. You should always look out for such seasonal offers since they can help you to get rid of the preclosure fee when paying off your loan.
When Moving Ahead with Preclosure of Personal Loan
Paying off your loan before the end of the tenure has many advantages, the biggest one being that you become debt-free. Now that provides a distinct sense of relief that can also be a great morale booster. Preclosure can help you to save a lot of money since you no longer need to pay the interest amount on top of your loan.
However, in doing so, you must be prepared for bearing the personal loan preclosure charges on top of the total amount required to pay off your loan. This is the reason why it is advisable to go for a preclosure only when you are saving a significant amount of money.
What is the Preclosure Process?
While the actual preclosure process for personal loans may vary across different lenders, the broad process is as follows:
- In order to initiate the preclosure process, the borrower needs to send a written application to the lender to close the personal loan i.e. request for the preclosure of the loan. This application should include all the necessary information related to the loan, including the loan account number.
- Upon receiving the application, the lender will calculate the remaining amount that needs to be paid while also including the preclosure fee. Then, the borrower is informed regarding the total amount of the preclosure and the date for preclosure.
- It is important to collect the No Objection Certificate (NOC) from the lender after closing the personal loan. The NOC certificate should include all the necessary information related to the borrower such as the total amount paid for the preclosure and the date of preclosure.
At Muthoot Finance, you can get an instant personal loan online. Get in touch with our experts to find out about your personal loan eligibility.