Personal Loan

Procedure to Follow While Closing a Personal Loan


A personal loan is taken for fulfilling personal benefits like renovating your home, making a down payment, or financing a marriage. Every day many people get their loans sanctioned and applying for a personal loan in India is no big deal. But, when it comes to closing it, there are some considerations that you should keep in mind. Do you also want the closure of your personal loan

Well, if yes, then this article is the right direction towards the closing of a personal loan. In this article, you will know about the two popular options to close your personal loan, the documents that are required, and the correct procedure to do it. 

What are the different ways to close your personal loan? 

There are two different ways through which you can close your personal loan. They are- pre-closure of personal loans and regular closure of personal loans. Both ways are different from each other and require different approaches likewise. 

The regular closure of personal loans is the most adopted option because of less hassle and convenience. But, some people also follow the second option – pre-closure of personal loans because of their requirements. You need to decide which one to prefer based on what your bank offers and your requirements. 

What is the regular closure of a personal loan? 

This is the most widely opted option to close your personal loan. In a regular closure option, the borrower has completed the repayment tenure successfully and paid all the loan amount in the form of instalments. By this, you will be sectioned with a green card by your bank and your debt is all over. 

Suppose, you took a loan of about 10 lakhs for 5 years in the form of monthly instalments. At the end of 5 years, if you have successfully paid all your instalments, you can apply for a regular closure at your bank. The bank then verifies your loan status, you are free from repayment and your loan account gets closed forever. 

What is the correct procedure for the regular closure of a personal loan? 

Here are the steps for regular closure of your personal loan:

  1. After you have paid all your instalments, contact your bank and let them know that all your dues have been paid and you want to close your loan account. 
  1. Make sure that you have paid all your extra charges, fines and penalties, in case you have them. In case you forgot about that and any amount is pending, pay it immediately to get ahead of this process. 
  1. After clearing everything, including extra charges, set up a meeting with the bank officials. Know about the formalities and the date of verification to close your personal loan account forever. 
  1. On the day of verification, take all your documents with you including your EMI leaflet. The bank verifies all your documents, your EMI status, your repayment of dues, etc. 
  1. After the successful verification process, your personal loan account is now closed forever. The bank now gives you a “No Objection Certificate” or NOC for any future reference. 
  1. If by chance there is something you don’t understand, you can contact your bank officials or customer care support. 

What is the pre-closure of a personal loan? 

A pre-closure of a personal loan is an option adopted when you want to pay your loan amount before the completion of your tenure. This happens in case you have surplus money and you want to repay before the lock-in period. But for this, you might be charged some extra fees, known as a prepayment penalty. The foreclosure charges depend on the bank and range between 0 to 5 per cent. 

The advantage of a pre-closure of a personal loan is that it either helps you reduce your EMI or tenure of repayment. Both ways, you are going to be on the profitable side. 

What is the correct procedure for the pre-closure of your personal loan? 

Here are the right steps to follow for a pre-closure of a personal loan:

  1. After you have successfully paid all your dues, extra charges, etc. contact your bank and let them know that you want to pre-close your loan account. 
  1. After you make sure that you paid for everything, set up a meeting date with the bank official for the verification process. 
  1. Ask the bank about the formalities for closing your account before the due date and the date of verification. 
  1. On the day of verification, take all your documents, EMI leaflet, and payment slips with you to the bank. 
  1. The bank then verifies all your documents and gives an” acknowledgement letter” and a green card for closing your loan account. You might also need to pay some foreclosure charges in case your bank tells you to do so. 
  1. After your loan account is closed, the bank gives you a No Due Certificate or NDC, which you should keep for future reference. In case you don’t understand something and have a query, contact your bank’s support system. 

What are the required documents required for closing your personal loan? 

Here is the list of documents that the bank asks you for verification before giving you a NOC or NDC certificate. 

  • ID proof– This includes your Aadhaar card, PAN card, Voter ID card, and other KYC details. 
  • Address proof– This includes your Aadhar card, Voter ID, Domicile certificate (optional), etc. 
  • All your bank details, loan account number, EMI leaflets, etc. 


Closing your personal loan account might seem like a big deal to you but is a very subtle process. The whole process gets over within a few days and you can permanently exit the loan. 

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