How to Close Your Personal Loan Early: A Complete Guide

Personal loans are a highly effective financing instrument for quick funds for various needs, whether to consolidate debt, make a big purchase, or take care of emergency expenses. While these loans provide immediate relief, many borrowers are curious about closing a personal loan early otherwise referred to as personal loan preclosure. This article will cover everything one needs to know about personal loan preclosure-how to close a personal loan early and how to close a personal loan fast.

What is Personal Loan Preclosure?

The personal loan preclosure means paying off the loan before the end of the original term. A better option for the borrower saving some interest or getting rid of debt would thus come into play when the borrower would prepay. Closing your loan early might be saving you some total interest in the overall life of the loan, and you could also set yourself free at times sooner than expected.

How to Close a Personal Loan Early

There are a few crucial steps involved in closing a personal loan early:-

1. Review Your Loan Agreement

Before any payments are made, you must check terms and conditions of your loan. Some lenders may charge prepayment penalties if you close the loan early. You must consider this, as it might negate any interest savings you have gained through early loan closure.

2. Check Your Loan Outstanding Balance

You must know exactly how much you owe on the loan. This is the amount that should be paid to close the loan entirely. Most lenders disclose this information on their official site or over the phone.

3. Provide Intimation to Lender

After reviewing your loan outstanding balance and confirming the decision to close your loan, inform your lender of the wish to opt for early termination of the loan. This will start your loan preclosure. After paying off the required amount, ask your lender to issue a 'no dues certificate' and an updated loan closure statement.

4. Make Final Payment

Settling the balance full must be completed. If possible, do that through an online method so the lender will give you immediate confirmation that the payment was made. If it is impossible for you to attach an entire amount at once, some lenders will offer the option of allowing a partial prepayment. 

5. Confirm Loan Closure

You must get a statement of loan closure from the lender once the payment has been processed. This statement will be evidence of the closure of your personal loan.

Importance of Preclosure of Personal Loan:

Benefits of Personal Loan Preclosure

1. Savings on Interest:

Another benefit that follows from personal loan preclosure is that it saves you on a lot of interest. Personal loans are paid back in fixed monthly installments, and the longer it takes to repay one, the more interest it collects on it. Closing the loan early allows one to manage the extra interest charge.

2. An Improved Credit Score:

When you successfully close a loan before time, it favors your credit score. A closed loan indicates creditworthy activities, which helps your credit picture and will subsequently be useful when applying for loans in the future.

3. Financial Freedom:

Early repayment of a personal loan means peace of mind for the borrower and that he or she can work toward other financial goals, be it saving for retirement or buying a house.

Things to Keep in Mind

• Prepayment Penalty: Some lenders may charge you with a penalty if you pre-close the loan before the agreed time frame. You should consider this in your decision-making.

• Terms of the Loan: Check whether there is any mention of early repayment in your loan agreement. Some loans offer you a rebate on the total interest in case of early closure, while others charge you a fee.

Conclusion:

Personal loan preclosure is a viable option to save interest, make some favorable changes to credit scores, and gain financial freedom a little instantaneously. If you are looking for how to close a personal loan early or how to fast-close a personal loan, you must know the whole process and what applies according to the terms set by the lender. Once you follow the steps above, you can easily close your personal loan before maturity and reap the benefits of being free from debts.