When it comes to managing finances or financial challenges, we often seek out assistance from lenders or funding institutions. Banks and Non-Banking Financing Companies (NBFCs) play an integral role in offering financial products like Personal Loans to help us. When you look for a Personal Loan and apply online, you get to experience quick loan processing and disbursal.
These days, most lenders allow you to pay off your loan in easy instalments according to a flexible repayment tenure of up to 60 months. In some cases, this tenure can even be higher. However, the prepayment of a Personal Loan before the end of its tenure might require you to pay pre-closure charges.
If you wish to find out how to remove these pre-closure charges, you need to understand how the entire process works first. Let’s get started by understanding the loan process from application to disbursal.
Getting a Personal Loan – The Process
When you apply for a loan, it is just one part of a multi-step process on your loan journey. Let’s learn more about the process of getting a Personal Loan.
- Determine Your Fund Requirement – The first step you should follow before getting a loan is to determine your exact requirements. This means defining the purpose of the loan, the loan amount and how you plan to utilize it.
- Check Eligibility Criteria – Next, check the eligibility criteria to find out if you qualify for a Personal Loan. Most NBFCs offering Personal Loans have simple eligibility criteria that are easy to understand.
- Calculate EMIs – Once you have checked the eligibility criteria, you can use a Personal Loan EMI calculator to calculate your monthly instalments. This will allow you to plan your finances accordingly and manage your budget effectively.
- Approach the Lender or Lending Institution – Research and approach lenders that offer the best Personal Loan at attractive interest rates. Once you have made the choice, go ahead, and apply for the loan.
- Apply For the Loan – Now, for getting a Personal Loan apply online for your specific purpose. Personal Loans have no restrictions on end use and can be used to fund almost any need.
- Submit Basic Documents – Most NBFCs only require basic documents for background verification. These KYC documents are used to check your personal, professional, and financial history to determine credit risk.
- Await Assessment of Loan Application – Once all loan formalities are completed, you need to await the assessment of your loan application. This is the stage when your application is evaluated for further approval.
- Receive Confirmation of Loan Approval – Upon successful evaluation and verification of your details, you will receive a confirmation of your loan approval. This is the penultimate step in your loan journey.
- Approve & Authorize Disbursal – Finally, all you need to do is approve and authorize the disbursal of your loan amount. Once that is done, you can receive the same in your chosen account within a few hours or days.
Personal Loan Pre-closure Charges – Here’s What You Should Know
Pre-closure refers to the process of repaying a loan before its stipulated tenure ends. While some banks do charge a certain pre-closure fee, you get to save overall in terms of low debt burden.
Personal Loans usually have a one-year lock-in period but that may vary between lenders. Here’s everything that you should know about the pre-closure process.
Process of Pre-closure
- Pre-closure Application – Apply for the pre-closure of your loan with your respective lender.
- Calculation of Foreclosure Balance – Once you apply for pre-closure, the lender will calculate your foreclosure balance. This is determined by the total number of outstanding obligations, the remaining loan term, and interest paid so far.
- Full Repayment of the Loan – When the calculation and other formalities are completed, you can pay off the remaining loan amount at a pre-closure charge as specified by your lender.
- Closure – Now you can foreclose your loan and reduce your debt burden easily.
Requirements for Pre-closure
The following are the things you need to provide for the pre-closure of your loan:
- Personal Loan Account Number
- Proof of Identity
- Loan-related Documents
- Pre-closure Quote
- Pre-closure check or demand draft
While you cannot remove pre-closure charges from a Personal Loan, there’s a silver lining. You can rest easy knowing that you’ve paid all your dues well ahead of time.