July 21, 2024

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Foreclose your personal loan to reduce interest rates and loan tenure

5 Simple Ways to Choose the Right Personal Loan Tenure

Getting an online personal loan is quite easy and helpful. An instant access to money without collateral – sounds perfect, doesn’t it? You can have multiple uses for it – personal loan for a wedding, personal loan for students, personal loan for paying back medical bills or more. 

Except the fact that you have to pay hefty EMIs. Personal loans often have interest rates attached to them, which makes paying that loan back even pricier. However, there is one way in which you can escape the burden of EMIs – foreclose the personal loan.

Here is everything that you need to know about it.

What is personal loan foreclosure?

By strict definition, personal loan foreclosure means that you are fully repaying your loan back to the lender. It is a very sensible step as it helps you to escape the shackles of paying EMIs. Simply pay back the outstanding amount and you are debt free. Personal loan foreclosure is a great way to pay back if you have extra funds and want to stop paying your regular EMIs. 

But wait. There is another step attached here – personal loan prepayment charges. This denotes that there are additional charges that are levied on you when you proceed to foreclose an online personal loan

Why do I have to pay the charges for foreclosure of a loan?

Consider this – banks provide you with personal loans so that they can earn money from it in the form of interest rates. On the other hand, when you pay back this loan amount early, the banks end up facing a reduction in the revenue that they expected when they lent you the money. That is why, to cover up for that, the bank or the money lender levies the foreclosure loan charges. 

What is the process to foreclose my personal loan?

Follow the steps as mentioned below:

  1. You cannot foreclose the personal loan online. Therefore, you will have to visit the nearest bank branch.
  2. You can find out the nearest bank branch on the respective bank’s website. 
  3. Once you are at the bank, you could reach out to a bank executive to help you with the personal loan foreclosure procedure. 
  4. You will be provided with a personal loan foreclosure form. Fill in all the details as required.
  5. The bank will also ask you to submit a set of documents.
  6. After that, you can pay the amount via a cheque, demand draft or even cash.
  7. The bank then provides you with an acknowledgement letter. Ensure that you keep this document with you safely.
  8. Finally, the bank will send you the closure document a few days later.

Documents needed for personal loan foreclosure

Make sure you have the following documents when you visit the bank for personal loan foreclosure:

  1. All the required loan documents.
  2. Carry a proof of address and identity card – Aadhaar, passport, voter ID card, etc.
  3. Statements containing the details of the EMIs that you have been paying.
  4. A cheque or a demand draft.

Thus, foreclosure of a personal loan is a great idea if you have a surplus of cash with you. Else, you will only have to keep paying your loans back with the help of EMIs.