Things to do after closing a personal loan to protect your financial health
25 February, 2025 | 17:43 IST
With the rapid adoption of digital lending, it has become quite convenient to apply for personal loans. You can easily compare multiple loan offers and apply for a suitable amount as per your need from your smartphone to cover immediate requirements or any big-ticket purchases. Applying for a personal loan needs a cautious approach to avoid falling into a debt trap. So, it is important for all borrowers to thoroughly check the repayment conditions, interest charges and other fees before availing the loan. Securing relevant documents after closure of the loan is also equally necessary for a healthy financial future.
It could be a big relief after paying all the equated monthly instalments (EMIs) but completing all the formalities associated with the loan closure can’t be ignored.
Let’s take a look at a few often-overlooked steps and precautions to take when closing your personal loan account.
Get the NOC: The No Objection Certificate, or NOC, serves as proof that you have successfully paid off your personal loan. It’s proof that you are no longer liable to pay any dues to the lender. Obtaining the NOC is of utmost importance, as it can help resolve any potential disputes that may arise in the future. It is essential to keep the original NOC or a copy of it saved on your computer. This document will also help you avail new borrowings in future.
Collect the account statement: Banks may provide a statement of accounts upon the closure of your personal loan. This serves as verification that all equated monthly instalments (EMIs) have been promptly settled. An account statement can significantly contribute to improving your credit score with credit bureaus. A favourable credit score can prove invaluable when seeking loans in the future. Therefore, it is important to inquire whether a separate statement of accounts can be obtained and you can keep a copy of the same with you.
Examine the final EMI calculation and payment: A borrower must carefully examine the final EMI calculation to ensure that all payments have been made in full. If payment is done through ‘pay later’ instruments or a cheque, customers must factor in the clearance time and ensure accurate interest calculations to prevent penalties in the future. This attention to detail is crucial to ensure that there are no surprises during the personal loan closing process.
Collect all your original documents from the lender: The important part of a loan closure process is to retrieve all the original documents submitted to your lender while applying for the loan. You would have been provided with a list of documents retained by the lender or might have maintained such a list yourself. So, it is essential to cross-reference the documents with the list to ensure that all of them have been returned. It is advisable to personally collect the documents from the bank or lender from whom you availed the loan.
Take back your unused post-dated cheques: When you apply for a loan and receive the approval, the lender may ask you to provide a few post-dated cheques as a security measure. These cheques protect the lender from financial fraud or EMI skips (if repayment is not automated). Therefore, as soon as you have paid off all of your outstanding debts, it is important to request that the lender return those cheques. Ensuring you receive your security cheques back is crucial for protecting your financial interests.
Ensure your credit report is updated: It is crucial to check that your credit report is updated after closure of every loan. The lenders report loan closures to credit rating agencies regularly. So, your credit score should improve with paying off every existing loan. If the loan closure is not updated on your credit report, you can also inform the credit bureaus to update the same. If needed, you can raise a dispute and it will be rectified after verification by the credit agency.
If you are looking for the best personal loan offers you can explore the Moneycontrol app or website. With a 100% digital process, you can access loans up to Rs 15 lakhs without the hassle of paperwork from top lenders. All you need to do is follow three simple steps: enter your personal details, complete KYC and set up EMI repayment.
Closing a personal loan account is an important milestone that requires careful attention to detail. Disputes may arise in future if the procedural guidelines are disregarded during this stage. From obtaining essential documents to inquiring about credit score updates, each step is crucial in seamlessly transitioning towards financial freedom. By adhering to these essential steps and precautions, borrowers can safeguard themselves from unforeseen disputes and ensure a healthy credit score. By staying informed and taking proactive steps, you can navigate the personal loan closing process with confidence, paving the way for better financial services.
Closing a personal loan requires one to take a few careful steps to protect credit score and financial prospects. From obtaining an NOC to updating your credit report, here’s a guide to closing your personal loan smoothly.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
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