Taking out a personal loan can be a smart financial move, but what if your circumstances change and you need to cancel the loan application? Whether you’ve found a better deal elsewhere or simply changed your mind, it’s important to understand your options for cancelling a personal loan after approval.
Understanding Loan Withdrawal Policies
Most lenders have a loan withdrawal policy that outlines the terms and conditions for cancelling a personal loan. These policies typically vary depending on whether the loan has been disbursed or not.
Cancelling Before Disbursement
If your loan has been approved, but the funds have not yet been disbursed, cancelling a loan application is usually a straightforward process. Many lenders allow you to cancel without incurring any penalties at this stage.
Here’s what you need to do:
- Contact your lender immediately to express your intent to cancel
- Provide any necessary documentation as per the lender’s requirements
- Follow the lender’s specific cancellation procedures
Cancelling a loan application before disbursement generally has no impact on your credit score, as no credit inquiry has been made at this point.
Cancelling After Disbursement
Once the loan amount has been disbursed to your account, cancelling becomes more complex and potentially costly. At this stage, cancellation is usually treated as an early repayment or foreclosure, which often involves penalties.
The process typically involves:
- Informing the lender of your decision to cancel
- Reviewing the terms to understand any pre-closure fees or penalties
- Submitting the required documentation
- Settling all outstanding dues, including the principal, interest, and any applicable fees
- Obtaining written confirmation of the loan closure from the lender
It’s important to note that cancelling a personal loan after disbursement may temporarily affect your credit score due to changes in your credit utilisation and repayment history.
The Cooling-Off Period
Some lenders offer a short cooling-off period, usually 3-7 days after disbursement, during which you can cancel a loan application without incurring penalties. This window allows borrowers to change their minds if they realise the loan terms are not suitable for them.
However, after this cooling-off period, cancellation is subject to the lender’s foreclosure charges, which can be substantial.
Factors to Consider When Canceling a Personal Loan
Before deciding to cancel your personal loan, carefully consider the following factors:
- Fees and Charges: Be prepared to pay pre-closure penalties, processing fees, interest on outstanding balances, and other charges as per your loan agreement.
- Legal Implications: Ensure you meet all legal obligations to avoid any disputes with the lender.
- Financial Implications: Evaluate how cancelling a personal loan will affect your overall financial situation and credit history.
Alternatives to Cancellation
If you find the loan terms unaffordable or unsuitable, cancelling the loan application is not always the best solution. Consider these alternatives:
- Loan Modification: Reach out to your lender to discuss the possibility of modifying the loan terms, such as extending the tenure or lowering the interest rate, to make the EMIs more manageable.
- Balance Transfer: Explore transferring your outstanding loan balance to another lender offering better terms. This can help you save on interest and manage your repayments more effectively.
- Prepayment: If you have the financial means, prepaying the loan partially or fully can help you close the loan faster and save on interest costs.
Summing Up
Cancelling a personal loan after approval is possible, but the ease and cost depend on the stage at which you initiate the cancellation. By understanding your lender’s loan withdrawal policy and weighing the implications, you can make an informed decision.
At Airtel Finance, we understand that financial needs can change unexpectedly. Our team of experts is always ready to guide you through the loan cancellation process and help you make the best decision for your unique situation. If you’re considering a personal loan, be sure to carefully review the terms and conditions upfront.
Airtel Finance offers transparent and competitive personal loans with flexible repayment options. Check your eligibility, use the Airtel Thanks App to apply, and get instant approval from the comfort of your home.
FAQs
- Can I cancel my personal loan immediately after approval?
Yes, most lenders allow you to cancel your personal loan if the funds have not been disbursed yet, usually without any penalties.
- Will cancelling a personal loan after disbursement affect my credit score?
Cancelling a personal loan after disbursement may temporarily impact your credit score due to changes in your credit utilisation and repayment history.
- What charges do I need to pay if I cancel my personal loan after disbursement?
Charges for cancelling a personal loan after disbursement may include pre-closure penalties, processing fees, and interest on the outstanding balance, as per your loan agreement.
- How can I cancel my personal loan application?
To cancel your personal loan application, contact your lender immediately, provide any necessary documentation, and follow their specific cancellation procedures.
- What are some alternatives to cancelling a personal loan?
Instead of cancelling a personal loan, you can consider loan modification, a balance transfer to another lender with better terms, or prepaying the loan if financially feasible.
