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Business Loans form an integral part in the life of an entrepreneur. People, who aspire to start and expand their business higher and do not have the finances for it, opt for business loans. A business loan is quite similar to a personal loan, but it serves the purpose to meet the necessities of a business.
Closing a business loan should be done after a lot of thinking and planning is done by keeping in mind all the aspects of the business.
- Loan closure at the end of tenure: End of business loan tenure implies that your loan tenure has come to an end. After paying the last EMI, you should write a letter to your loan provider saying that your loan tenure has ended. You also need to appeal them to give back your documents.
- Loan Closure by Prepayment: It is required to pay the prepayment penalty if a business loan is closed before the end of the loan tenure. There is a certain amount of prepayment fee that banks usually charge on the principal outstanding or the amount you want to prepay. Get all the cancelled post-dated checks that you had issued to the bank or finance company when you took the loan.
How to Close Your Business Loan through Creditseva
After closing any loan, it is a good idea to know the credit score, to ensure that there are no errors. This is not mandatory but recommended if one is likely to take any other loans within one to two years. Creditseva is your financial friend which will guide you in closing your business loan in a proper way.
Types of Business Loan Closures
The concept of Business Loan Closure has been categorized into 4 different types. They are as follows
- Regular Closure
- Bad Loan Closure
- Settled Loans Closure
- Pre-Closure: In this case, you are required to ask for a pre-closure statement of a future date. Later on, you need to sign a check for that amount and therefore you will finally be able to close your business loan account.
- Regular Closure: Regular Closure is nothing but closing the business loan after the loan tenure has been completed. In this case, the loan is closed regularly in a simple procedure without any complexities.
Procedure for Closing a Business Loan
There is a particular process to be followed while closing a business loan. If you are willing to close a business loan, the following information needs to be filled up by you on the “Loan closure request” page.
- Firstly, you should select the business loan account which you are willing to close, then the second step is to mention the account number in the space provided under the Account Number Section.
- After you have filled up the above details, you are asked to specify the reason for requesting the loan closure.
- The next step includes your personal contact details like mobile phone number, email id etc. Along with the contact details, you are also asked to mention the suitable time to contact you in the case of an enquiry regarding the loan closure.
- Finally, after you have completed filling the above-required details, click on the submit button so that your request for closing the business loan is processed.
Sample Letter for Closing a Business Loan (From the Bank)
This is a sample letter that you will receive after sending a letter to the bank requesting a business loan closure
Name of debtor ……………….
Address of debtor …………………
Subject: Request for Closing Business Loan
Dear Ms /Mr. ____________
This is a response to the request you had sent for the payment of the balance amount towards your loan application number ____________ as a lump sum principal. We are pleased to notify you that your request for closing the business loan is approved. You are requested to pay a lump sum principal of __________ for the final and complete settlement of your business loan. As it is mentioned in the loan agreement, the complete and final closure is going to be done in one only single instalment as it is after the 2nd years of your taking the loan, there will no penalty on your account.
Business Loan closure FAQ’s:
1. What information do I need to request the closure of a business loan?
You will need the loan account number to request a closure of that loan.
2. If I request for closing my business loan, will it automatically close my business loan account?
No. If you make a request for closing the business loan, it will not close the business loan account automatically. In order to close a business loan account, there is a procedure to be followed.
3. Do banks allow pre-closure in business loans?
Yes, it is allowed in business loans. It is usually seen that few banks allow the borrowers to close a business loan account after 6 months of paying of the initial EMI.
4. Is it possible to use the balance transfer facility of another bank to close the loan?
This can be possible sometimes, depending on the bank you have taken the loan from.
Most of the banks are strict in following a rule wherein the borrower should use their own funds for pre-closing the loan.
5. What are the costs associated with closing a small business loan?
Some banks do not charge any costs for pre-closure while some of them charge a fee ranging from 2 to 7%. These costs depend on the loan type and size.
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