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Procedures to Follow When Closing a Personal Loan

3 Min Read
Author - Sanyam Jain
Procedures to Follow When Closing a Personal Loan

Personal loan, as the name itself suggests, is taken to deal with a personal financial situation that can be anything from funding a wedding to taking a vacation, or renovating a home or making a down payment on a home loan, the list goes on and on.

Nowadays, getting a personal loan is not that difficult and neither is closing it. But there is a dire need to be very careful and watchful because even the slightest mistake can cost you a fortune.

While closing your personal loan, it is advisable to always check with the bank whether all your dues are cleared or not. There are chances that according to you, you have repaid the whole amount, but sometimes charges like late fees or some other penalty is levied and if not paid on time, the interest keeps getting charged and this not so big amount ends up hurting your pocket deeply.

In this blog, I will take you through a step by step process as to how you can ensure that your personal loan account is closed. Before that, we need to know the types of closures that are available.

Closing a loan account on the due date is called regular closure while closing it prior to the due date is called pre-closure .

One should inform the bank of the type of closure he/she is opting for.

In case of regular closure , ask the bank for NOC (Non-Objection Certificate), and in case of pre-closure , ask the bank to provide you with NDC (No Dues Certificate).

Both these documents are very important and must be kept safely for future reference.

  • Closure for Regular Personal Loan: In regular closure, a borrower repays all the EMIs on the previously decided periods and after the payment of the last EMI, the loan account gets closed. Once this account is settled, the borrower is supposed to acquire a NOC and a ‘personal loan closure certificate’ from the bank.
  • Pre-Closure for Personal Loan: In pre-closure, a borrower repays the loan before the end of tenure, known as “Loan pre-payment.” In fore-closing, it is necessary to keep in mind the minimum lock-in period. Every bank sets a minimum lock-in period before which you cannot prepay the loan. After this lock-in period, the borrower can prepay the loan but needs to pay some “foreclosure charges” that vary from bank to bank. The foreclosure charges on personal loans range from nil to 5% varying from lender to lender.
  • Bank

    Lock-in Period

    Prepayment charges


    6 months


    HDFC Bank

    12 months


    ICICI Bank

    6 months


    Axis Bank

    1 month

    1-12 EMI-5%, 13-24 EMI-4%, 25-36 EMI-3% and; Above 36 EMI-2%

    Kotak Bank

    12 months


    Yes Bank

    12 months


    To check the prepayment charges of all banks, click on the link below:

    Pre-closure allows the borrower two options- either to reduce their EMI or to reduce the tenure of repayment.

    • Part-Payment for Personal Loan: This option can be used in a scenario where a borrower gets a large sum of money suddenly say a bonus or some other form of windfall gain, and by making this part-payment, he/she can ensure that their personal loan gets repaid much earlier than it was supposed to. The part-payment reduces the EMI amount as well as the tenure of loan. There are some charges levied on part-payment as well, which may vary from lender to lender.
    Now, let us look at the procedure for closing a personal loan:

    Procedure for the Regular Closure of Personal Loan

    • After all the dues have been paid, contact your bank and confirm that all the outstanding dues are cleared. In case any amount is pending, pay that amount and make sure that there is no outstanding left.
    • Once you are sure that there are no more dues, set a meeting with the concerned bank employee to complete the other basic formalities of closure.
    • You need to carry a few documents like - ID proof, loan account number ( a cheque if there is any amount to be paid). All these documents will be verified by the bank before they proceed for closure.
    • After verification, the account will get closed. Once that is done, be sure to collect the NOC from the bank, which is your proof of the full and final settlement of your loan account.
    • In case of any queries, you can also give the bank’s customer care a call and seek support in closing your personal loan.

    Procedure for the Pre-closure of Your Personal Loan

    Before deciding to go for pre-closure, make sure that you check the lock-in period, the charges levied and the lenders’ terms and conditions on pre-closure.

    • Visit the bank from where the personal loan was taken. Make sure that you are carrying the required documents- ID proof, bank statement (of payment of your last EMI), loan account number and a cheque or DD for prepaying the remaining amount, along with the penalty charge of prepayment.
    • After all the dues have been paid, the bank will give you an ‘acknowledgement letter’ which has to be kept safely for future references.
    • If all the dues are clear and on verification of all your documents, the bank will send a ‘loan agreement’ within a few days after the closure of the loan.
    • Make sure that you procure the NDC(No Dues Certificate) from the bank which is your proof of settlement of your loan account and that you do not owe anything to the bank anymore.

    Finally, there are a few things that you must keep in mind while closing a loan. First, at the time of closure, make sure that you are carrying all the original documents that you had submitted at the time of loan application. Second, collect the NOC from the bank and make sure that it has your name and your loan account number on it. And lastly, submit a written request to your lender to update your CIBIL score after the repayment and make sure that it gets done.

    That’s all that you needed to know in order to close your personal loan. I hope this article resolved all the questions you had in mind.

    About Author

    Sanyam Jain
    Highly motivated and utterly skilled, a young and zealous writer trying to follow his passion for the love of English language.An actor, a singer and above all a writer, has written over 500 poems till date and wishes to publish his own works soon. With an experience of almost three years in content writing, Sanyam is working as an integral part of the content team at MyLoanCare.

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