What documents are required for loan foreclosure?

When we take a loan, we pay the loan amount in the form of monthly installments (EMI) for a fixed period. But apart from monthly installments, you can also close your loan account by depositing this amount in lump sum.

Suppose you have taken a loan for 12 months and after paying the installment of three months, you want to close your loan by paying the remaining amount of the loan in the fourth month itself, then this is called loan foreclosure in the language of banking.

Process of loan foreclosure

Step 1- To close the loan before time, first of all the customer has to apply to the bank or finance company in which the customer has a loan account. The customer has to attach a copy of the loan account number, PAN number and address with the application.

Step 2- After the application, the bank will withdraw the remaining amount. Keeping in mind the amount of interest paid till now and the date of foreclosure, the bank will inform the customer about the outstanding amount. The customer can pay the outstanding amount through cheque or online transfer.

Step 3- After receiving the outstanding amount, the bank completes the formalities of foreclosure. From then on, the customer's EMI is stopped. After that, within 10-15 days, the customer's original documents along with any other related documents are returned.

Step 4- Apart from the original documents, the customer should not forget to take a no dues certificate from the bank. Check in the no dues certificate that the certificate mentions the customer's name, address along with the fact that the customer no longer owes any amount.

Also keep these things in mind-

Before closing the loan, know what your loan type is. There is no charge for closing a floating rate loan before time. On the other hand, some charge is levied on a fixed rate loan. These charges are added to the foreclosure payment.

Check the document checklist to ensure that all documents have been returned to you in good condition.

Inform the rating agencies immediately after foreclosure so that they can update your loan details in their records.


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Balasahana Suresh

07/03/2025 10:10 AM