You can have an unsecured personal loan, which will not require you to mention your house or your vehicle as security. Hence, they charge a higher interest rate and are much easier to get than secured loans.
Although these loans can be very convenient, some disadvantages might be connected with them, like a high interest rate. If you continuously pay off your loan as quickly as possible, it will help your credit score and the possibility of applying for other loans. You're better off financially, too.
Types of Closure in a Personal Loan
- Full closure of personal loans: When the borrower pays off all interest on the loan, it is called a regular closure of personal loan. Now, after the last instalment, the borrower will tell the lender to close the loan and get the loan closure certificate.
- Personal loan pre-closure: The personal pre-closure essentially applies to the situation when the borrower chooses to close a personal loan before its stipulated ending.
- Part payment of personal loan: One who has availed themselves of a personal loan can use the part-payment option with a view to reducing the duration of the loan, and accordingly, the monthly instalments also will be reduced.
Documents Needed to Pre-close Your Personal Loan
- Relevant loan documents.
- Identity proof and address proof: Voter ID cards, passports, Aadhaar cards, etc.
- Loan statements clearly mentioning the details of the EMIs paid so far.
- Draft for Demand or Cheque.
Guidelines to close your personal loan early
Use these general guidelines for closing your personal loan early:
- Check Your Loan Agreement: Go through your loan agreement again, or even call your lender to know the penalties or fees for prepayment or early repayment.
- Calculate Payoff Amount: Determine the exact amount you will pay so that you have finally cleared the loan. The reason this would normally be more than what your current balance is is because of the accumulation of interest since your last payment.
- Arrange for Payment: Once you finally know the payoff amount, make arrangements to pay. This may mean a trip to the bank, mailing a certified check, or an electronic fund transfer, depending on a lender's rules.
- Get Confirmation: On completion of the above payment, obtain an acknowledgment from your lender that represents complete repayment of debt. It should include language that indicates a zero balance and that your loan is closed.
- Check your credit record: A couple of weeks after payoff, check your credit record to show that the loan either is "paid" or "closed." This will ensure that no errors are having an effect on your credit rating.
- Keep Records: Files of every email, check, and approval relating to loan closure should be kept. This material may turn out to be very vital later for reference purposes.
- Follow-Up: If you either don't get the confirmation or find inconsistencies, call up your lender immediately to resolve the issues.
Conclusion
Closing personal loans early will increase your creditworthiness and enhance your credit ratio. There are certain loan-providing companies like Sabkaloan that offer guidance on loan repayment. These procedures will help you effectively close off your personal loan early and ensure that all of your debts are paid on time. Get in touch with the experts of Sabkaloan and discuss the loan closure plan.
