Banks and lending institutions offers a loan for specific tenures to its clients and adjust its asset liability management (ALM) accordingly. Therefore banks demands for a regular and timely repayment of EMI and dues. Since the nature of loan is unsecured in this case therefore the pre-closure of the personal loans should result in a positive impact in your CIBIL report. As you already have a CIBIL score of 830 so you don’t need to worry about score while planning for home loan in near future. Multiple unsecured loans can have bad impact on the CIBIL score. Since you are planning for a home loan in 2 months therefore it is better to opt for a pre-closure of personal loan to reduce the extra leverage taken over your financial position.
Pre closure may not directly affect your score. However, your chances of creating a good credit history, which will result in an improved score, will be affected. Even if you have the required funds, it is advisable that you continue to make your payments on time and close you account on the initial due date. Plus, you will save on the 4% charge.
When we tender our loans before time, we believe we are doing the right thing as a borrower. But contrary to popular belief, foreclosing or prepaying a loan can actually cause your credit score to take a beating. Let us examine in detail.
At times picking up a loan seems the obvious thing to do. Borrowing can be fun till the time your EMIs show up. However, soon, repaying debt becomes a daunting task. People begin to look for reasons to prepay their debts. Ironically, it can lead to a drop in your score.
Avoid prepaying a loan to save your score from declining. Let’s say currently credit score is 710 but after a prepayment it drops about 20 points. Assuming you do not deal with credit for some time and therefore your score remains below par at 690 for that time. However, if it isn’t prepaid, then with time the score will certainly get better if repaid on time every month.
Keeping the loan active shows you can successfully manage your credit and therefore it helps boost your score. Even if you have enough money, look for avenues to invest elsewhere and build your wealth rather than rushing to pre-close debt accounts. At least, let the secured loans live on your credit report for the entire tenure.
Credit score is calculated based on various parameters like the number of loans/credit cards – open and closed both, outstanding balance and payment history against each account, number of enquiries. The foreclosure of your Personal loan would have an impact on your credit score based on its linkage with various such factors.
Personal loans are high interest loans and it would be a good option to repay the outstanding balance if you have the capacity to repay.
Your credit score will suddenly experience a hike. if you are having a bad credit score then it is a good way to increase your score.
it is better to access the account and do the pre-payment through online portals of the lenders. try any nbfc to reduce any kind of hassle and avail faster process. you will also be able to apply and access the loan account from any corner of the country, be it bangalore or any other place.
Loans have become a necessity nowadays. With the development in the process, acquiring loans from banks or financial institutions has become easy. Though it is believed that taking a loan takes time and efforts. Same is the case when you want to close a loan. There are two ways in which personal loan can be closed. It can be closed at the end of the loan tenure or it can be closed prior to the loan tenure. The former is called closure and latter is called foreclosure.
Loan closure:- Paying off the last installment doesn’t mean a closure. When a person takes a loan, an account is created in the name of the person and this needs to get closed once your loan is repaid or over. This is termed as loan closure.
Foreclosure:- After 6 months of sanctioning the loan, all banks provide the borrower an opportunity to pay the remaining principal amount with a small percentage of the interest for closing a loan. This is termed as a foreclosure.
If you are wondering how to close a loan then here is the answer to it. Follow the below-mentioned steps to close a loan.
There are four different categories of loan closure. They are
Let us discuss these in brief:-
Things to complete while closing a loan:-
Make sure your CIBIL report is updated. When all your dues are paid, the bank should inform CIBIL for updating the account information and to improve your credit score.
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