Personal Loan

Pre-closure Checklist for Closing Your Personal Loan Early


You eventually realized you needed to either pay off your outstanding debt or bills. Or you needed quick cash to fund wedding plans, get the latest gadgets, or even go on a short vacation. What do you do in such a case? You make a Personal Loan application.

What is a Personal Loan?

In comparison to other types of loans, a personal loan provides more flexible alternatives for usage. Also, it offers a wide range of lending features. For example, you can have speedy loan disbursement, competitive interest rates, customizable EMI schedules, and comfortable payback terms. So, what if you wish to pre-close the personal loan you have taken? What will happen if you close the personal loan? Here are a few things:

  • 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.
  • Better future loans or investment chances with the same lender.
  • Higher credit score

Most banks allow you to pre-close a personal loan by paying the outstanding balance after six instalments at any time. But, there is a prepayment penalty for doing so. Let’s check out what it is. But before that, we will have a quick look at the types of personal loan closures.

Types of Personal Loan Closures

Regular personal loan closures:

A typical personal loan closure occurs when you have paid off all of the EMIs. The Lender will issue the No Objection Certificate for the Loan Closure. They will also give the Loan Closure Certificate after receiving notification from you following the Final EMI Payment. For the lender to give the No Objection Certificate for the loan closure and eventually, the loan closure certification, you must inform the lender after making the final EMI payment.

Personal Loan Pre-closure:

When you decide to pay off a personal loan before the term is up, you are doing a personal pre-closure. You typically have the option to pre-close the personal loan after a year or make a minimum payment of 12 EMIs. When the loan is foreclosed, the borrower must pay the current month’s EMI, any overdue dues, and the foreclosure fees.

Personal Loan Part-payment:

If the individual loan borrower wants to minimise the monthly instalments and the term of the loan, they can make a part payment. The portion payment amount will be subject to the financial lender’s terms and conditions.

Personal Loan Pre-Closure Charges

Financial lenderForeclosure fees
HDFC Bank2% – 4%
Yes Bank2% – 4%
CitiBank4% + GST
Kotak Mahindra Bank5% + Service Tax

How to Close Personal Loan Early?

A personal loan pre-closure may not be a difficult challenge. However, you must understand the process when applying for a personal loan from a bank, as it may change from one bank to the next. The following are some fundamental actions you can make during the pre-closing of a personal loan:

  • You must find the closest bank office to pre-close your loan because personal loans cannot be closed online. By phoning the bank’s customer service number, you can get the location of the closest branch.
  • If you visit the bank, you can ask a bank professional in the loans section to assist you by describing the pre-closure process if you are unfamiliar with it. Once you understand the procedure, you can request a pre-closure form.
  • Read the form carefully and fill in all the loan and personal information requested. Sign the form once you have completed it without any blank areas.
  • You must also provide a series of documents to pre-close your loan. The following documents are required:
  1. A document serving as identification, such as a passport, driver’s licence, or Aadhar card.
  2. Loan documents.
  3. Bank statement reflecting the payment and clearance of the last EMI.
  4. Pre-payment statement, which you can avail by requesting with the bank. It can be sent to you either online or via post.
  • Once all documents have been submitted, you can pay by cheque, demand draft, or cash.
  • If you cannot visit the bank for whatever reason, you can send a representative to do so on your behalf. However, your agent should have a letter of authorisation with your signature on it. They should also have all of the necessary documentation with them:
  • Identification document (such as a passport, PAN card, driver’s licence, or voter ID) provided by the loan applicant.
  • Applicants for loans must provide a letter of authorisation.
  • The bank will provide you with an acknowledgement letter once you have completed all the steps; this letter needs to be carefully saved.
  • A few days after the loan is closed, you will receive the official closing of the loan agreement.

You feel better mentally after paying off personal loans because you are no longer burdened by monthly expenses. Your decision to pay off a personal loan early can be influenced by calculations. However, the decision to save money on interest or to feel more at ease ultimately rests with you.

The paperwork needed to pre-close a personal loan

  • Loan-related paperwork
  • Identification documents such as an Aadhaar card, a passport, a voter ID card, etc.
  • Loan statements display the details of the EMIs paid to date.
  • Cheque or demand draft.

After the pre-closure of a personal loan, you need to gather certain documents.

  • Receipt for pre-closing payments.
  • Closing the personal loan requires a No Objection Certificate.
  • Closing statement for a personal loan.
  • Certificate proving payment of dues


Personal loans have exceptionally highinterest rates compared to other loans, which increases your burden of EMI. Many people find it relieving to pre-close or partially pay off their loans as and when they have the extra money to lessen their debt burden. Pre-closures and partial payments are frequent practices whenever salaried employees obtain bonuses or raises.

Visit Piramal Finance to learn more about the offerings and services.