The foreclosure of a personal loan is a situation where a borrower pays the entire repayment amount in a single go. However, a personal loan borrower has to check if the lender organization allows the provision of foreclosure.
If there is a lock-in period on the personal loan imposed by the lender, you can opt for foreclosing it after it is over. A borrower generally chooses to foreclose a personal loan to escape from the debt trap and avoid paying the monthly EMIs every month.
A Guideline on Personal Loan Foreclosure
Here, you can get the complete guidelines on how to apply for a foreclosure of the personal loan. However, the lender bank can also foreclose a personal loan in certain circumstances. The bank can impose a foreclosure when the borrower starts defaulting on the loan EMIs due to a cash crunch.
Here, the steps to execute a personal loan foreclosure are given in detail:
1. Approach Lender Bank
As a borrower, you have to approach the lender bank and inform them that you are desiring the pre-payment. The bank executives might instantly let you know if they can provide the opportunity of foreclosure. Try getting all the necessary information from the customer executives regarding this matter while you opt for a personal loan.
Once you finalize the pre-payment, provide all the documents that the bank requires. The papers and documents will be verified before the bank allows you to do so.
2. Fill Up the Application Form
You need to fill up the application form and submit it to the bank as written proof for pre-paying your loan.
3. Payment
Once the bank sanctions your application, you can deliver the necessary amount of money to the bank and close the personal loan. No more monthly EMIs will be levied on you after the personal loan settlement.
The documents of the foreclosure will be given to you by the bank once the complete procedure is over. It might also ask for the papers of personal loan application when providing the documents of the foreclosure as proof.
So, these are the leading steps by which you can apply for a pre-payment. Make sure you are ready to give the outstanding money against your loan as it might be hefty.
Facts to Know while Opting for a Personal Loan Foreclosure
There are some important facts that you must remember before deciding to go for the foreclosure of a personal loan. You must always try to consider the following facts:
1. Pre-Payment Fees
The lending organizations impose a fee on the personal loan foreclosure process. Often, this is a hefty amount as the banks desire that no borrowers apply for a prepayment. However, as different lending organizations charge variable fees on a foreclosure, you might not need to pay the hefty foreclosure amounts.
2. Sum of Outstanding EMI
As a borrower, you should always calculate the sum of the outstanding EMI that is left. If it is less than the amount that the bank asks you to give to foreclose your loan, it is better to pay the monthly installments. The matter of the lock-in period, as mentioned earlier, must also be considered.
3. Foreclosure Affects the Credit Score
A personal loan foreclosure can deliver a negative impression on the credit score. It can slightly decrease the credit score of the personal loan borrower. The reason is, the foreclosure is against the standard banking norms in the country.
However, personal loan foreclosure is the best way to avoid excessive expense and burden. Even if it puts an impression on your credit score, you can easily improve it by following the strategies to improve your credit score.
Advantages of Personal Loan Foreclosure Must Know
There are some prominent advantages that you can enjoy while foreclosing on a personal loan. Some of the leading advantages are mentioned below:
- Personal loan pre-payment helps the borrower incur more savings
Personal loan borrowers can save a lot of money while foreclosing. The burden of repaying the monthly EMIs gets diminished instantly if he delivers the foreclosing amount. You can always go for a personal loan that allows a foreclosure.
2. The tenure of the loan gets reduced
As the tenure of the personal loan gets reduced, there are no EMIs for the personal loan anymore. So, a personal loan will not exist anymore.
So, this is the complete guideline for the foreclosure of the personal loan application. As a borrower, you should have a clear talk with the loan expert before making any decision. Try finding the desired answers to every question that arises in your mind related to the pre-payment of the personal loan. It is always advisable to follow the suggestions given by the loan expert and opt for one.
