pre closing personal loan

Personal Loan Preclosure Procedure

04 Jan 2022

Acquiring personal loans can help you to get rid of your financial binds. However, taking out a loan implies that you must repay it within a specific time frame in order to avoid late fees and a bad credit score. Pre-closing a personal loan ahead of schedule has some additional benefits, including a positive impact on your credit ratings. Several lenders permit pre-closure of a personal loan by paying the due balance after twelve payments. However, this varies from lender to lender. You should always choose the pre-closing personal loan option if you can repay the loan amount before the term ends. It will help you establish good financial health as well as obtain another loan hassle-free as it will demonstrate your repayment capability.

Types of Personal Loan Closures

Here are the various modes to close a personal loan:


If you close the personal loan before the end of the term, you will save money on EMIs. You may choose to close your personal loan after paying a minimum of twelve EMIs. When you do the pre-closing of a loan, you are required to pay the current month's EMI, any overdue dues, and the pre-closing costs.

Regular Closure

Under regular closure, you can pay off EMIs in a timely manner and close the personal loan as per the fixed loan tenure. Following the payment of the last EMI, you must notify the lender in order for the lender to provide the NOC for the loan closure as well as the loan closure certificate.

Part-Payment Closure

You can lower your monthly installments and the term of the loan with the help of the part-payment closure. 

Personal Loan Pre-Closure Process

Here are the steps to follow for the pre-closing of a personal loan.

  1. To start, you need to visit the bank’s branch to close a personal loan as  banks usually don't provide the service of pre-closing a personal loan online

  2. Next, you should ask for a pre-closure form from a bank official. If you are not familiar with the procedure of pre-closing a personal loan, you may seek help from bank professionals. 

  3. Complete the application form carefully with the required details. 

  4. After filling the pre-closure form, submit it along with the necessary documents, including ID proof, loan documents, etc.

  5. Following the submission, you will be asked to do the payment for the pre-closing of the personal loan.  You can do the transaction through cash, cheque, or Demand Draft.

  6. Thereafter, the bank will provide you with an acknowledgement letter. 

  7. The final pre-closing personal loan document will be sent to you in a few days.

In any case, if you are not able to visit the bank, you may send another person in your place for the pre-closing process along with an authorization letter signed by you. You are also required to provide all necessary information, including your ID proof, address proof, loan documents, etc. 

Documents Required for Personal Loan Pre-Closure

The documents that are required to close a personal loan are listed below:

  • Documents pertaining to the loan

  • Proof of Identity (Aadhaar card, Driving license, Voter ID card, Passport)

  • Resident proof (Rent agreement, Passport, Aadhaar card, Utility bills)

  • Loan statements that show the total amount of EMIs paid to date

  • Demand Draft or cheque

Personal Loan Pre-Closure Charges

Every bank has its own pre-closing personal loan charges. Some of them are mentioned below:

Name of the Bank

Pre-Closing Personal Loan Charges

Kotak Mahindra Bank

5% + service tax is also applicable 

Citi Bank

4% + GST is also applicable


5% + GST is also applicable


Varies between 2% to 4%


Varies between 2% to 4%

*Fees and charges are subject to market conditions and financial institutions’ discretion.

Documents You need to Collect after Personal Loan Pre-closure

After the pre-closing of a personal loan, there are a few necessary documents that you must collect from your concerned bank.

Here is the list of documents.

  • You should check for the receipt of the pre-closure payment.

  • You must collect a NOC from the bank after the pre-closure of the loan.

  • A certificate of personal loan closure is also required to be picked up from the bank.

FAQs for Closing Personal Loan

  • ✔️Could there be a reason why my pre-closure was halted by the lender?

    You must adhere to the lender's policies if you wish to close your personal loan before the loan tenure. If the lender has put a hold on your pre-closure, you can contact them for further information.

  • ✔️How can I settle my personal loan?

    You can settle your personal loan into manageable EMIs, or you may also choose the option of pre-closing your personal loan.

  • ✔️Are the foreclosure charges applicable for all financial lenders?

    Except for the SBI and the Axis Bank, every financial institution has its own foreclosing charges.

  • ✔️Which will be better for my credit score? Making a foreclosure or repaying the loan over the tenure?

    Pre-closing your loan will have a significant impact on your credit score. If you can repay the loan amount before the tenure, you should always opt for that. It will create a positive financial record and help you acquire another loan hassle-free.