Offline personal loan foreclosure: A step-by-step guide to clearing your debt | Mint

Personal loans come in rescue when individuals suffer from sudden or unexpected financial challenges. Some major challenges during which personal loans come in handy are: medical expenses, education expenses, surgery costs, marriage expenses etc.

Still, even after all the ease such personal loans provide borrowers it has been witnessed that the process of foreclosing i.e., culminating these loans can be quite complicated and challenging for borrowers.

RBI is consistently working towards ensuring that foreclosure of loans becomes an easier process for borrowers. The aim basically is to ensure that borrowers do not incur additional fines and processing charges to close their loans. This article is dedicated towards discussing the step-by-step guidelines on how to foreclose your personal loans offline.

Understanding the concept of loan foreclosure

When an individual applies for a loan, they enter a contractual agreement with the lender and make a promise to repay the borrowed money according to the terms laid down in the contract within the stipulated time.

Now loan foreclosure is nothing but the process of repaying your loan before its scheduled and decided tenure ends. It has been witnessed that traditionally, lenders charge penalties and high fees for early repayment.

Though it is also worth mentioning that RBI’s recent draft circular aims to eliminate these foreclosure charges on floating rate loans to help borrowers in closing out loans in a smooth and seamless manner. This step will help borrowers particularly those with micro and small enterprises to comfortably close out their loans.

Steps to foreclose your personal loan offline

1. Carefully review your loan agreement: The first step is to carefully go through and review your loan agreement with your lender. This step involves asking questions, resolving doubts if any and understanding the terms and conditions of your loan carefully. Your document will also contain terms and conditions with regards to penalties and high interest costs if any for early repayment. This needs to be identified clearly.
2. Check and write down outstanding balance: Always reach out to your lender and obtain the exact outstanding amount and remaining balance, including any accrued fees or interest. This ensures that you are in sync and aware about the total amount required to be paid by you for foreclosure of your borrowed money.
3. Request a foreclosure quote in writing or through mail: This is a very important step, always clearly ask your lender for a pre-closure quote, that outlines the exact amount needed to be paid by you to close out your loan. Tell me to provide you with a copy on your registered email id along with the clear break up of the original loan, taxes, processing fees (if applicable) so that you have written evidence of the amount requested by you.
4. Try to make the payment digitally and keep the evidence: Now once you have the necessary documents and a clear understanding of the outstanding amount i.e., balance visit your lenders branch to make the payment. Ask them for help and directions if in doubt. Definitely ensure that you obtain a stamped receipt as proof of the transaction for all future purposes.
5. Ask for a No Objection Certificate: Once the payment is made, request your lender to provide you with a no objection certificate (NOC). This document doubly confirms that you have repaid the loan in full along with all interest accrued. It also signifies that there are no outstanding dues on you. This document will help you in keeping yourself legally safe and sound, just in case such a situation arises.

Conclusion

Therefore, these are some simple steps that borrowers can take to close out their loans offline. There can be minor differences in technicalities in different banks and financial institutions but the basic process will remain the same. That is why it is always prudent to reach out to your financial institution to obtain further information and clarification on the process.

Finally, RBI’s guidelines and initiative to drop away with foreclosure charges is a significant development. It can provide much needed relief for borrowers looking to close out their loans early without any financial implications and hefty penalties, more developments on the same are still awaited.

Thus, by following these simple steps individuals can efficiently manage their personal loans and ensure that their credit borrowing experience remains smooth and seamless.

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