Two-Wheeler loan foreclosure process

Usually, a borrower decides the tenure of repayment initially when applying for a bike loan. During the end of loan tenure, if all dues have been cleared, the lender issues a no-objection certificate. It states that the loan has been paid and the borrower is free from all the liabilities. This is a normal scenario for making loan repayment. 

Sometimes, the borrower's loan repayment ability increases over a period of time, and they plan to foreclose the loan earlier. Foreclosing a loan works perfectly for the borrower, however, the NBFC, Bank, or Financial Institution involved may charge a penalty for prepaying the loan amount. Before foreclosing a loan, you need to check with the lender about the pre-defined lock-in period. All banks and lenders have different penalty clauses for their customers. Do check the terms and conditions before signing up for the loan. 

If you decide to foreclose your loan, then you need to ensure closure of all financial/ non-financial claims that the Financial Institution may have:

Request for foreclosure and list of documents required by NBFC/ Financial Institution

The borrower must inform the lender before doing loan foreclosure. Without the lender’s approval, the borrower is not allowed to foreclose. When the lender approves the loan approval, the borrower is required to carry the address proof, id proof,  and cheque or demand draft for doing loan foreclosure. 

Clear all dues and ask for NOC

Before two-wheeler loan foreclosure, clear all the pending dues of the lender to get a no-objection 

Lien removal and request for a legal clearance certificate

Upon foreclosure, the borrower must intimate the lender to remove the lien from the registrar's office. Once the lien is removed, the lender has no claim on the two-wheeler. Further to safeguard yourself, you can obtain legal clearance from a legal advisor. This will ensure that the loan is closed properly, and the borrower will have no outstanding liabilities. You must also get an encumbrance certificate (EC) post getting the lien removed.

Retrieve original property papers, post-dated cheques, and documents

Post foreclosure, when you get NOC and clearance letter of two-wheeler loan from the lender, make sure that all your original two-wheeler documents have been returned properly. Duly sign the acknowledgment letter only after adequately verifying the documents that have been returned. You cannot hold the lender liable for any issues that may arise at a later date. If you have given any post-dated cheques to the lender, make sure to collect those too.

Final Loan Statement (Post Closure)

Once you close the two-wheeler loan, you must ask for a final loan statement. This statement will contain all details of the loan including amounts, dates, payments made, and outstanding payments if any. It will also mention the date the loan was closed, thus ensuring that you have credible proof of repayment that will help strengthen your credit score and settle all debts.