Personal Loan

How Can You Close Your Personal Loan In A Few Steps?


A personal loan is a great way of obtaining credit to fund your unexpected financial requirement for many purposes without the need for any collateral. However, it is required to repay the loan amount along with the interest amount. According to experts, paying off the debt is the best way to reduce your financial burden. Even though you pay off your loan and are done with the obligation to your bank or lender, it’s still in your best interest to close the loan with proper procedure. This is why it is important to know the right procedure for closing a personal loan.

What is a Personal Loan?

A personal loan is a credit instrument offered by a bank that can be used as immediate assistance to fulfil urgent cash needs without pledging an asset as collateral for the loan’s repayment. A personal loan can be used for many purposes like home renovations, wedding expenses, international travel, the purchase of high-end electronics, and down payments on mortgages.

A personal loan is substantially more difficult to obtain than other types of loans. Personal loan applications are typically sanctioned in less than a week and are generally processed more quickly. Various banks have different personal loan interest rates, although they typically range from 15% to 20% annually. Closing a loan should be a top priority since if neglected for long periods, debts continue to mount.

Different Types of Personal Loan Closure

1. Pre-closure

A pre-closure of a loan happens when the borrower chooses to pay off the personal loan before the set tenure. Most of the time, The borrower has two options: making a minimum of 12 EMI payments or pre-closing their personal loan after a year. When the loan is foreclosed, The borrower will be responsible for paying the current month’s EMI, any unpaid balances, and the foreclosure fees.

2. Regular closure

In regular closure of a loan, the borrower closes the loan after paying off the EMIs on the dates agreed upon each month and closes the loan when the tenure, which was mentioned in the loan contract, is over.

Why is it Important to Close a Personal Loan?

Closing a personal loan is required for a variety of reasons as listed below:

  • lowering interest costs
  • reducing the burden of debt
  • There are no unpaid debts against your name.
  • Reduced EMI values against your name if you want to take up a new loan or make an investment.
  • Allows for better future loans or investment chances with the same lender.

It is also important to avoid any defaults in loan payments to maintain a good credit score.

Documents Required to Close a Personal Loan

  1. Personal Loan Document: You need to submit all documents related to your personal loan, bank statements showing repayment of the loan, etc.
  2. Identity Proof and Address Proof: You need to submit proof of identity and address proof which may include a passport, Aadhar Card, PAN Card, or any other government-issued identity document.
  3. Additional loan-related documents: The loan approval letter, loan account statement, and other documentation provided by the bank fall under this category.

Step By Step Procedure to Close a Personal Loan

A Regular Closure of Personal Loans Happens When an Individual Closes the Loan once the entire tenure has been completed. After fully paying back your loan, you need to follow some procedures to close the loan.

  1. Once all of your loan EMIs have been paid, It is good to get in touch with the bank to confirm whether there are any remaining payments or all the outstanding debt has been paid. Because you might have some penalty if you had some late payment or some other unpaid charges on your loan if you had missed or paid some EMIs late. That’s why it’s crucial to contact your bank and confirm whether your loan account is ready to be closed or not.
  2. If everything is clear, then you can set a date for when you wish to complete the remaining procedures for the closure of the loan. If everything is in order, the bank will often send you the closure certificate either through postal mail or email.
  3. When you visit the bank, You must bring identification proof, the loan account number, and a cheque to check if there is any amount due. The bank official will check your documentation and loan account before proceeding with the closure of your loan.
  4. Once you have finished all the procedures, your account will be closed automatically by the bank. You must collect a “Non-Objection Certificate” (NOC) from the bank As it serves as proof that the loan has been closed. The certificate that there is no unpaid payment and that the borrower has fully repaid the loan.
  5. You can also reach your bank customer care centre and ask for assistance in closing off your personal loan.

3 Important things you should keep in mind when closing a loan

A personal loan does not get close just after paying down the loan balance alone. you need to follow some specific procedure to completely close a loan. Here are the 3 things you should remember while closing a loan:

  1. You must never forget to collect back the original documents that you have submitted to the bank at the time of loan application.
  2. You must submit a written request to your lender organization so that your CIBIL report gets updated after the loan closure. Check to see if the same was completed on time as well. Also, check whether the same has been done on time or not.
  3. In the case that you can’t go to the bank at the time of closure, then you can authorize a person to carry out the proceedings on your behalf but this can only be done with the bank’s prior approval.


It is important to close a personal loan following adequate procedures even after you have repaid the loan. Once your personal loan has been closed, you are free to pursue your other lending and investment options whenever you like! If you need any financial assistance or apply for a personal loan, Piramal Finance is at your service.