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Things to Know While You Close Your Loan Account - Outside View by PersonalFN

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Things to Know While You Close Your Loan Account
Apr 24, 2015

Many of you may have taken some loans from banks or other financial institutions at some point in time. These could be home loans, car loans, loans against property and so on. Everyone wants get rid of their debt burden and hence endeavor to close their loan accounts at the earliest, which can then facilitate to enjoy a larger share of their income every month. Hence, when our loan payment tenure comes to an end, we experience a lot of joy and satisfaction for having paid all the Equated Monthly Installments (EMIs). However, while becoming excited on your achievement is a good thing, don’t forget to fulfill all the formalities when closing your loan account. For your benefit, PersonalFN has listed down points which should be kept in mind while closing of your loan account.

  • Take the closure letter or No Dues Certificate The closure letter or No Dues Certificate (NDC) is evidence that you have closed your loan and are no longer required to make any further payments to the lender (bank, housing finance company, etc.). It is extremely important that you receive this from your lender as it will help you in case of any disagreements that may happen in the future, if you decide to sell your asset or even if you wish to take another loan in the years to come. Moreover, once you receive it, make sure that you keep it in some safe location and don’t discard it.

  • Take the statement of accounts

    Sometimes a separate statement of accounts is also given by banks. This is evidence that all the EMIs have been paid on time and can help you in your endeavor to obtain a healthy credit score from Credit Information Bureau (India) Limited (CIBIL). A healthy credit score can be of great help if you wish to take loans in the future as well. Thus, you must find out if a separate statement of accounts can be issued to you and preserve it once you receive the same.

  • Obtain all your original documents

    Another important thing which you must remember to do is obtain all the original documents that you might have submitted to your lender at the time of taking the loan. You would have received a list of documents which have been kept with the lender or you might have maintained such a list yourself. So, tally the documents with that list to ensure that all your documents are received. It would be wise to collect the documents yourself from the bank or any other lender from whom you have taken the loan from. While collecting the documents, check whether all the pages of the documents are present and only then sign the acknowledgement form.

  • Remove lien on your assets

    It is possible that the lender might have registered the mortgage document in the registrar office and put a lien on your asset. A lien allows the lender to sell your asset if you don’t make your EMI payments. Thus, you must visit the registrar office and make sure that the lien on your asset has been removed once you close your loan account.

    In case of car loans as well, once your loan has been closed, you should visit the Regional Transport Office (RTO) and the general insurance company for removal of hypothecation, as the car would have been registered on your lender’s name and you would need to replace this with your own name.

  • Inform CIBIL regarding your loan closure

    Once your loan account has been closed and formalities have been completed, you must enquire with your lender whether they have informed the same to CIBIL or not. If not, you must request them to inform CIBIL or you may do so yourself by submitting the requisite documents to CIBIL. By doing so, CIBIL will update its records that you have paid your EMIs and closed your loan account, and thus give you a healthy credit score when you apply for one.

PersonalFN is of the view that the process of loan closure does not end by paying all the EMIs. For your own benefit, it is imperative that you complete all the formalities so that you can keep your finances in pink and enjoy a stress-free financial life. If you have not completed any of the above mentioned formalities then you must do so immediately.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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