Article

Procedure: How to Close a Loan
February 06 , 2013

  1. Many banks charge a penalty of 2-3% of the outstanding amount for repaying loan amount before the tenure ends. Foreclosure penalty has been done away with in case of floating rate home loans by many banks and it is soon set to be completely scrapped by law.
  2. Prepayment may be allowed entirely or in part by different banks. If allowed in part find out in how many installments the remaining amount can be paid back. Also get details from the bank about how much you are required to pay including any pre payment fees and the applicable service tax.
  3. Fill out the form for foreclosure and give a written application to the bank manager to close the loan. If EMIs are deducted from your account through ECS issue a stop-payment instruction in the absence of which the following month's EMI may be deducted but it will be refunded. Carry with you the bank statement showing clearance of the last EMI.
  4. Make payment through cash, cheque or DD as directed by the bank. Don't forget to collect any original documents submitted to the lender.
  5. If while going for the loan you expect to make prepayment choose a shorter tenure with higher EMIs. This will reduce the total interest payment to be made.

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