Personal loan foreclosure is the process of full repayment of the balance loan amount in a single payment prior to the end of the loan tenure. The borrower can decide the number of equated monthly installment (EMIs) they wish to pay before foreclosing the loan. They can pre-plan loan foreclosures and decide the amount they want to pay at one go.
For some of the most critical criteria to apply instant personal loan foreclosures is a fixed period on the loan account. Borrowers are required to complete the fixed lock-in period prior to deciding to settle the loan account. Pay back the outstanding amount in full.
Types of Personal Loan Foreclosures
Loan foreclosure by the bank
It is essentially not always initiated by the borrower. If the borrower fails to pay the personal EMI payments for a continuous period or has stopped ensuring monthly payments. Therefore, it is no longer financially possible to repay the loan — therefore as a last resort, the bank would foreclose the loan.
In such a scenario, the bank would necessarily take steps to bargain the collateral of the borrower to raise the capital that is equivalent to the outstanding loan amount. To have raised an equal amount, the bank would then move on to foreclose such accounts.
7 Steps Followed for Personal Loan Foreclosure
In certain cases, as a borrower, one is not allowed to foreclose a personal loan for a term of 12 months, beginning from the date of first EMI. For instance, the banks might request to provide a foreclosure intimation of a 30 days period.
The foreclosure process usually differs from one bank to another. However, here are additional steps required to be considered:
Step 1: Locate the closest branch
Because the foreclosure of a personal loan isn’t done online. Therefore, to request a loan foreclosure — one must require to visit the local bank branch or a financial institution from where they have certainly borrowed the loan.
Step 2: Submit an application for foreclosure
Upcoming step is to ensure the bank in writing about the decision to easily repay the amount of an outstanding loan. Ensure to mention the personal loan account number in the application.
Step 3: Provide all the necessary documents
One would be required to submit all the required documents as requested by the bank.
The most generally required documents and details include the following list:
- All of the personal loan documents as well as the details.
- Documents allowed as identity proofs by the government, for instance — PAN card, Aadhar card, driving license or passport.
- Bank statements which would be a proof of the latest EMI payment as well as the clearance.
Step 4: Intimation by the bank
Post submitting the required documents, the reputed bank or the financial institution will eventually verify the documents. Afterwards, proceed to calculate the pending loan amount that requires to be paid post considering the EMIs and charges of an interest that have been paid up to date. With this, taxes as well as applicable foreclosure charges would also be considered into account. The lender later on sends a foreclosure statement. Ensure to specify the amount along with the date to repay the amount of an outstanding loan.
Step 5: Repayment of the personal loan
One would be required to make complete payment of the pending loan amount along with the other charges as mentioned by the lender. The amount of outstanding will be paid at least seven days prior to the upcoming EMI of personal loan. Foreclosure payment for a personal loan can be easily made in the form of cheque, demand draft, cash, or by making an online transfer.
Step 6: Rectifying the personal loan foreclosure
The payment is received along with outstanding dues that have been easily cleared. The bank or financial institution will proceed with the personal loan foreclosure formalities. Stopping the routine reminders as well as instructions around the EMIs. The lender eventually returns all the original documents afterwards as well as hands over the below set of documents.
- Acknowledgment letter and payment receipt
- No dues certificate
- No objection certificate for personal loan foreclosure
- Personal loan closure certificate
Step 7: The credit rating agencies informed
Repayment of the loan in advance has an affirmative impact on the credit score. Therefore, once a person is able to complete the personal loan foreclosure formalities as well as crystal clear the outstanding dues. Making sure that one keeps credit rating agencies apprised about the personal loan foreclosure.