Loan Closure :Points to Remember

Knowing how to close your loan cleanly is as important as smart borrowing.

In fact, more so, for, till you do this, you will not get unfettered ownership of the house or the car that you bought with the loan. If you had borrowed to meet an expense, fully repaying a loan will take the debt weight off your shoulders. Here are the points to remember to ensure that there are no residual hassles after you have closed your loan

Loans Closure:

Loan PrepaymentIn case you want to foreclose your loan, you need to inform the bank about the date of prepayment through a letter. It is better to give a month’s notice to the bank, says Kamlesh Rao, head (mortgage), Kotak Mahindra Bank.

This gives the bank the time to calculate the exact outstanding interest, principal and the penalty that has to be paid. Banks usually let you know in a day or so about these liabilities. Remember to take a letter from the bank regarding the exact amount that needs to be paid and the break-up of the amount.

Also, ask for the acknowledgement of the cheque through which you prepay the loan.You will get your documents back only after the cheque gets cleared. This usually takes 15 days. Checking the documents is crucial as any discrepancy that comes up later would be difficult to trace. So, compare the originals with the duplicate copies you had kept. Ensure that every sheet is intact.

Home loan closure:

Request for an acknowledgement of the cheque through which you pay the last EMI of your home loan. The bank will return your documents once the cheque gets cleared.If your home loan is from a cooperative bank and you are paying your last EMI in cash, you will get your documents right away.

Car loan closure:

In case of car loans, the closure procedure is similar to that of home loans. However, the bank has to send out certain documents to the RTO and the insurance company.Obtaining a no-dues certificate addressed to the RTO is crucial.“You are also required to fill a form for removal of the financer’s endorsement and submit it to the RTO,” says apnaloan.com CEO Harshvardhan Roongta. The endorsement basically bars the customer from selling the car.The bank would also need to prepare a similar letter addressing the insurance company.After obtaining these three letters, you need to submit them to the respective authorities. Remember, that you need to take your RC and insurance papers while submitting the removal of endorsement form with the RTO.

Personal loan closure:

The procedures for closing a personal loan are similar to that followed while closing a home loan.Credit Card ClosureUndisputed casePay all dues, including all transactions not yet charged to the account, well in time.You can simply call up the call center or send a letter saying you want to cancel the card.Destroy the card by cutting it and sending it to the bank along with the letter.

The bank usually reconfirms the cancellation once it gets the intimation from the customer, says Sachin Khandelwal, head (credit cards), ICICI Bank. Some people insist that sending a letter is better as it’s written proof that the cancellation is sought.Getting an acknowledgement is crucial.

Never put an undestroyed card in any drop box of the bank. You can hand it over to bank officials if they give you an immediate acknowledgement.Always keep a copy of all correspondences with the bank and with any other official of the bank. Disputed caseIn cases where the billing has not been cleared or there are other disputes, it’s best to first settle the issue with the bank.

If you have a savings account with the same bank and haven't settled the issue, the banks have a right to adjust the credit card billing through your savings account balance. The bank will give you a notice before doing so.

Always inform the bank before destroying the card.In case of unwanted delivery of card, inform the bank immediately in writing and destroy the card according to instructions received from the bank.Documents to be collected from the bankA letter specifying that the loan has been closed.

This usually includes a no-dues certificate. This document is very important whenever you are go to sell your home or your car.An account statement for the entire loan course. This will help you keep a record of all the payments you have made and income tax benefits availed, if any.

Obtain a letter specifying your payment track record. This would help in case you take any other loan in future.

Get your title documents of your car or home, or any other security that you may have deposited with the bank while taking the loan, apart from other agreement documents.