Most people generally become careless while closing or pre-closing a loan. Here we are taking a look at some crucial things which one must not forget while doing that.
Most people usually take lots of precautions while availing a loan — whether a home loan, car loan, personal loan or any other type of loan. However, people generally become careless while closing or pre-closing a loan. They just heave a sigh of relief after paying off the last EMI, and don’t remember to follow the procedural guidelines, which can also put them in trouble later on.
Here we are taking a look at some crucial things which one must do while closing or pre-closing a loan:
1. Pre-closure charges
Most of the banks and NBFCs charge a foreclosure fee/penalty when borrowers decide to repay the loan before the tenure. “While in case of home loans, there is no penalty levied, vehicle loans and personal loans do invite prepayment penalty, which ranges from 1% to 5% of the outstanding balance before the pre-closure. So, check the foreclosure charges before applying for the loan closure,” says Pranjal Kamra, CEO, Finology.
2. Obtaining NOC
An NOC or No Objection Certificate acts as a proof that you have cleared all your dues and there is no outstanding loan on the account and the lender does not have any more legal right on collateral or documents given. “It helps in avoiding any discrepancies with the lender in future. So, make sure to collect the NOC containing all relevant information like your name, address, loan account number, details of closure etc,” he says.
3. Obtain all your original documents
While sanctioning loans, banks take some important documents like sale deed, conveyance deed, Power of Attorney, cancelled cheque, etc. So while closing the loan, you must take back all the important documents which you had submitted earlier.
4. Removal of Lien
Many a times the lender puts a lien on the property of the borrower in order to refrain him from selling the property. Thus, after your home loan repayment, you must visit the registrar office along with the bank officer to remove the lien against your property. In case of a vehicle loan, you need to visit the regional transfer office to complete the hypothecation removal procedure.
5. Ensure updation of your CIBIL Score
It is the duty of the bank or the financial institution to update your loan repayment action in CIBIL database. “But many a times banks delay in this process and due to this the borrower’s CIBIL report shows outstanding balance despite paying all dues. This might create a problem in applying for a new loan. So, you need to check your latest CIBIL report and request your lender for the update if it is not done,” says Kamra.