When you get a personal loan you need to pay an equated monthly installment. These EMI are cautiously calculated and divided throughout the loan repayment period. However, you might wonder if you want to repay the entire amount in one single down payment rather than multiple EMIs. In such a case you opt for a Foreclosure amount of a personal loan.
In detail, the total repayment of the entire loan balance in one single go, other than the EMI is known as the Foreclosure of the loan. For opting the foreclosure the individual needs to choose the EMI and then choose the month of foreclosing the remaining loan balance. To go forward with this you will have to use a personal loan foreclosure calculator and get a detailed overview.
A comprehensive guide to the foreclosure procedure:
To repay the entire remaining loan amount in one single instalment the procedure differs from bank to bank or depends on your lender. The basic process is explained below step by step.
Step 1 – Visit the nearest branch
The process of foreclosing a loan cannot be done online, so you must search for the nearest bank branch. Do call the customer care team of your respective bank and get the accurate details.
Step 2 – Write an application
Submit a preclosure form attached with a formal application, written by you to the bank manager.
Step 3 – Produce all the important documents
The following step will be to provide all the essential documents that are required by your bank. For instance, the below-given list is for an idea of the documents you might require.
- Loan documents
- Personal identification: Adhhar, Voter Id, etc
- Details of the loan account
- Proof of EMI payments and the bank statements.
Step 4 – Prepayment of the remaining loan balance:
Once you are through with submitting all the required documents the bank or NBFC will combine the outstanding loan amount. Borrowers will have to make payments through checks, demand drafts, or online transfers such as RTGS or NEFT.
Step 5 – Document receipts
After you have cleared all the outstanding dues, your lender will then move forward with the foreclosure process. The lender will stop all the EMI reminders and will return all the original documents in 10-15 days. The bank or loans lender will also provide you with an:
- No Dues Certificate
- Letter of Acknowledgement
- Pre-Closure Receipt
- A certificate of no objection to close the loan
- Certificate of loan closure
Step 6 – Do call out agencies in charge of credit rating
After done with the foreclosure requirements, it is important to inform the agencies in charge of credit rating, regarding the loan prepayment. This will widely help with your credit score.
How to use the foreclosure calculator?
You can use a personal loan foreclosure calculator to calculate your outstanding loan balance which is taken as the foreclosure amount. This calculator helps you in determining and understanding the effects of prepayment on your existing finances
This calculator is very crucial for personal loans or to consider the fact any kind of loan. It is very simple to use this calculator. It is simple to calculate the foreclosure loan amount using a foreclosure calculator that will assist in calculating the pending balance of the loan amount along with the pending interest payment. To get the most accurate calculation you will need to put in the following details.
- Your loan tenure
- The rate of interest on your loan
- The total loan amount and the outstanding loan amount.
- The Foreclosure Month
- The total number of EMIs paid by you.
- The charges or costs incurred during the foreclosure process.
The Foreclosure calculator will consider all the above information and calculate the final amount that you will have to pay during the foreclosure month.
In addition to this, few banks might also levy personal loan foreclosure charges. These charges differ from bank to bank. Usually, after you have paid more than one equated monthly instalment for the loan, 4% of the outstanding loan amount resists your foreclosure charge.
Few benefits of foreclosure of personal loan:
Prepayments of your loans can also serve you benefits:
- You save a lot on interests: The EMI are monthly loan instalments are calculated with interest and hence if you pay the entire amount beforehand then the interest rates do not bother you anymore.
- Positive effect on your credit score: It is obvious that paying bills and loans before time or within the given period helps with increasing your credit score.
- Less debt burden: You will be debt-free and that has its advantages. Less stress and low financial risk are everyone’s dreams.
Putting it all together we establish that foreclosure of the loan is quite beneficial for the borrower. However, let’s not forget that it might rip a huge lump sum amount out of your account and also adds up prepayment charges.