3 MinsJune 16, 2023
When you find yourself short of funds to meet an urgent need, many of you may opt for a personal loan. And why not? It is the fastest and easiest way to meet the shortage of money for almost any kind of need.
When you repay as per the schedule, without missing a single EMI, it is called a regular closure. If you choose to prepay the entire loan amount before the due date, it is called foreclosure. Many borrowers prefer to prepay a
personal loan to reduce their financial liability and avoid paying high
personal loan interest rates.
If you want to prepay or foreclose your personal loan, this blog will tell you how to do it.
What is Personal Loan foreclosure?
Personal loan foreclosure is the full payment of the outstanding loan amount in a single instalment before the loan tenure is completed. You can foreclose your loan only after completing the lock-in period.
The lock-in period for a personal loan is usually one year from the date of the first EMI or the payment cycle of a minimum of 12 EMIs. But it may vary based on your lender.
Payment of foreclosure charges
A lender may charge you a penalty for foreclosing a loan. These charges are applied because the lender loses the interest earned on the loan value. Foreclosure charges vary from lender to lender. Axis Bank charges 5% of the principal outstanding
plus GST for a personal loan foreclosure. If you wish to prepay the loan amount to avoid paying interest rates for the entire loan tenure, you can foreclose the personal loan on payment of foreclosure charges.
NOC for foreclosure
A No Objection Certificate (NOC) is issued once all the outstanding dues are paid to the lender. The lender issues the NOC after payment of the outstanding loan amount and closure of the loan account. You should verify that all the information,
including the loan account number, your name and your address, is correct in the NOC.
Also Read: [ How to choose the best Personal Loan lender?]
How to foreclose your Personal Loan?
If you want to foreclose your Axis Bank personal loan account, check your
eligibility for personal loan foreclosure and follow the steps given below -
(1) Visit your nearest Axis Bank branch. The foreclosure cannot be done online.
(2) Submit a foreclosure application form duly filled with all the necessary
documents. These include personal loan account documents, bank account statements as proof of last EMI payment and your KYC documents.
(3) The bank will verify the documents and calculate the outstanding loan amount along with applicable
taxes and foreclosure charges.
(4) The bank will send a foreclosure statement with the amount and date of repayment.
(5) You can pay the outstanding amount with foreclosure charges by cheque, demand draft or an online transfer.
(6) After receiving the payment, the bank starts the foreclosure formalities. The bank issues the following documents after the foreclosure process is complete:
- Payment Receipt
- NOC for personal loan foreclosure
- Personal loan closure certificate
- After the foreclosure, ensure that the credit rating agency updates all the entries and reflects your new credit score.
Foreclosure is an option to pre-close a personal loan account. But you may have to pay foreclosure charges for doing so. Hence, always consider your repayment capacity before taking a personal loan. Use Axis Bank's
EMI calculator for personal loans to calculate a suitable EMI value and a loan tenure to repay the loan comfortably.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.