Federal Bank Personal Loan Pre-closure

Pre-closing a Federal Bank personal loan allows borrowers to repay the outstanding amount before the scheduled tenure, reducing interest costs. However, it involves eligibility criteria, required documents, and pre-closure charges. Understanding these factors helps avoid unnecessary fees and ensures a smooth loan closure.

Federal Bank may levy pre-closure charges depending on the loan type and repayment timeline. The table below outlines the possible charges:

Disclaimer: The above charges are subject to change as per the lender’s policies.

To pre-close a personal loan with Federal Bank, borrowers must meet specific conditions and provide necessary documents.

Eligibility Criteria

• The loan must complete the minimum lock-in period, usually 12 EMIs

• Only the borrower can initiate the pre-closure request

• All previous EMIs should be paid without any delays

• A recent loan account statement is required to verify the outstanding balance

Required Documents

• A valid identity proof like Aadhaar Card, PAN Card, or passport is needed

• The original loan agreement must be submitted for verification

• A pre-closure request form must be filled and submitted at the bank

• Payment should be made through cheque or demand draft, including pre-closure charges

Here are the essential steps to pre-close your Federal Bank personal loan smoothly and avoid any processing delays:

1. Visit a Federal Bank branch or log in to online banking to check the outstanding loan amount

2. Contact customer care or visit the branch to confirm pre-closure charges and financial benefits

3. Collect documents like identity proof, loan account statements, and the loan agreement

4. Submit the pre-closure request form, required documents, and payment at the bank branch

5. After payment, request a No Objection Certificate (NOC) and loan closure confirmation

Here are the key benefits and drawbacks of pre-closing your Federal Bank personal loan to help you make an informed decision based on costs, savings, and financial impact:

Advantages

Lower Total Interest Payment

Pre-closing the loan reduces the overall interest cost, helping you save money over the original tenure.

 

Faster Debt Repayment

Closing the loan early eliminates monthly EMIs, freeing up income for other financial goals or expenses.

 

Improved Credit Score Over Time

A successfully closed loan with a good repayment history could improve your credit score in the long run.

 

Higher Loan Eligibility in Future

Reducing your debt burden may enhance your chances of securing new loans with better terms.

 

Better Financial Stability

Being free from EMIs reduces financial obligations, allowing better control over your monthly budget.

Disadvantages

Pre-Closure Charges Reduce Savings

Federal Bank may levy a pre-closure fee, which could offset the interest savings from early repayment.

 

Potential Credit Score Impact

Closing a long-term loan early may slightly reduce your credit mix, affecting your score temporarily.

 

Lower Liquidity for Emergencies

Using savings to pre-close a loan may leave you with limited funds for urgent financial needs.

 

Lock-in Period Restrictions

The bank may require you to complete a minimum number of EMIs before allowing pre-closure.

 

Opportunity Cost of Funds

The amount used for pre-closure could have been invested in financial instruments offering better returns.

Here are key factors to check before pre-closing your Federal Bank personal loan to avoid unnecessary costs and financial impact:

Evaluate Interest Savings vs. Pre-closure Charges

Compare the interest you save with the pre-closure charges to ensure that early repayment provides a financial advantage.

Check the Minimum Lock-in Period

Federal Bank may require you to complete a minimum number of EMIs before allowing pre-closure, so verify this condition beforehand.

Ensure Sufficient Emergency Savings

Using all your savings for loan pre-closure may leave you financially vulnerable in case of unexpected expenses.

Impact on Credit Score

Pre-closing a personal loan could affect your credit history, so check how it may influence your overall credit score.

Obtain No Objection Certificate (NOC)

Always request an NOC from the bank after pre-closure to confirm that the loan is fully settled.

Update Loan Closure in Credit Report

Verify with credit bureaus that the loan closure is reflected in your credit report to avoid discrepancies.

Consider Alternative Investment Opportunities

Instead of pre-closing, assess whether investing the lump sum in higher-return financial products could be more beneficial.

Confirm Pre-closure Process with the Bank

Visit the bank or contact customer support to understand the exact pre-closure steps and required documents.

Verify Outstanding Loan Balance

Get the latest loan statement to check the exact outstanding amount, including any accrued interest.

Understand Future Loan Eligibility Impact

Pre-closing a personal loan may improve your debt-to-income ratio, but it could also affect your credit profile for future loan applications.