It is now easy to apply for a loan in the digital age. Many apps, platforms, and banks offer personal loans or instant loans. A personal loan can be used to finance any purpose as the borrower chooses. Online individual loan applications promise quick approval and disbursement.
Is it easy to cancel the loan after it has been confirmed? Imagine you applied for credit without knowing the terms and conditions of the loan or the EMI. You may discover that you cannot pay the EMI or might be surprised by the interest. You may find a lender who offers a personal loan with much lower rates and more favorable terms. Is it possible to cancel a loan in such circumstances?
The loan can be canceled unless it has been disbursed but sanctioned. This decision must be made quickly, as some lenders will spend the money immediately after the deal has been confirmed. In some cases, this can be done in just four hours. Each lender has its terms and conditions for cancellation. In some cases, this may include a penalty or fee.
However, once a loan has been approved and disbursed, it is much more difficult to cancel and costly. Reversing the loan after it has been paid will likely be treated like an early repayment. Most instant personal loan companies charge prepayment penalties. It could be up to 2% or more of the outstanding principal. If you apply for a personal credit of INR 10,000/-and want to reverse it, even one minute after the disbursement, the prepayment fee could be INR 20,000/. You will also have already paid processing fees and GST. These will be forfeited. However, you could negotiate a partial or total penalty waiver with the lender. Your relationship with the service provider and their loan policies will determine your decision.
It is expensive to cancel a loan once you have selected your lender, signed the agreement, confirmed it, and sent the money. Even if you find another lender who offers better terms and lower rates, it may be more expensive to cancel the original loan or to port the loan over to the new lender due to prepayment penalties and processing fees.
You may apply for a loan to cover a frivolous expense, but you need to do the maths to realize that you won’t be able to pay the EMIs on time. It is best to cancel the loan, even if it means paying the penalty. Remember that every default in EMI payments will affect your credit score. It will also affect your ability to borrow money at a future date. The lower your credit score is, the more interest you will pay.
Therefore, considering your options carefully before applying for a loan is wise. Compare various lenders’ interest rates, penalties, and EMIs before making a decision.