21 MAY, 2020

Financial emergencies can approach at any time. This is when one can turn to a personal loan for immediate help. The unsecured loan does not come with an end-use criterion and can be used to fulfil different purposes. Whether it is funding a holiday, buying a high-end gadget, renovating your home or even serving wedding costs, a personal loan can be extremely useful.

If you do have a personal loan as part of your financial debts, it is likely that managing you loan payment and closure is at the top of your focus. Making timely monthly payments and closing your loan as per the loan tenure or before will bring your great financial relief:

Here are some ways to close your personal loan:

Personal loans can be closed through a variety of repayment methods. Here are some ways that you can use to undertake the same:

Regular closure – This kind of closure involves closing the loan in the period as mentioned in the loan agreement. You must pay your loan EMIs at regular intervals and the loan is closed at the end of the tenure period. The process is straight forward and takes place as per the mentioned terms and conditions in the loan agreement.

Pre-closure – As the name suggests, a pre-closure means that you close the loan before the end of the tenure. This way, you save a lot on your EMIs. This method can be used if you think that you are left with excess money in your budget and can pay off the loan altogether. You may be allowed to pre-close the loan only after completing the lock-in period as stated by the bank. However, you must note that there may be foreclose charge levied on the same.

Bad loan closure – Bad loan closure is used when the borrower defaults in loan repayments. It is offered in times of financial loss or bankruptcy. However, this kind of closure can have a negative impact on your credit report.

Steps involved in closing a personal loan

Closing a personal loan is a fairly simple process. You must connect with your bank representatives and work on ways to complete your payments. The bank will return to you all the original documents that were submitted at the time of the loan application. Ensure that you contact the bank and follow the process and collect a No Objection Certificate (NOC) stating the payment of the loan in full at the time of the personal loan closure.

Additional Read: Understanding the common fees and charges related to Personal Loan

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.