Home or Car Loan Closed? Don’t Forget These Crucial Steps to Avoid Future Troubles

Most people take a home or car loan to buy a house or vehicle. A home loan is usually for a long period, often around 20 years, while a car loan lasts for 5 to 7 years. When people’s financial condition improves, they often repay the loan early or within the given time.

If you are also closing your home or car loan, there are some important things to keep in mind. Ignoring these steps can cause problems later. Here, we are sharing important information about what to do after closing a loan.

1. Pre-Closure Fees

Many banks and non-banking financial companies (NBFCs) charge foreclosure fees or penalties if you decide to repay the loan early. For home loans, no penalty is typically charged, but many banks do apply pre-closure fees on car loans and personal loans. This fee can range from 1% to 5% of the outstanding amount. Therefore, it’s important to check the foreclosure charges before closing the loan.

2. Get Original Documents

When taking out a home loan, you often need to submit original documents like property papers, power of attorney, and cancelled cheques. After repaying the loan, make sure to collect all the original documents you submitted earlier.

3. Don’t Forget to Get NOC

After paying off the loan, don’t forget to ask for a No Objection Certificate (NOC). The NOC is proof that you have cleared all dues, and no loan balances remain. It can help you avoid any future issues. Ensure that the NOC includes your name, address, loan account number, and other relevant details.

4. Request Removal of Lien

Banks often place a lien on the property to prevent its sale until the loan is repaid. After repaying your home loan, you should visit the registrar’s office with a bank representative to remove the lien. For car loans, visit the regional transport office to complete the process of removing the mortgage.

5. Check Your CIBIL Score

Your CIBIL score reflects your loan repayment history. After paying off your loan, check your CIBIL score. Sometimes, the outstanding balance may still appear on your CIBIL report even after you’ve repaid the loan. This could cause problems when applying for a new loan. Review your CIBIL report and ask your lender to update the information if needed.