Should You Cancel a Personal Loan After Its Approval?
Instant loan apps have made everything from the approval to the disbursement process simple. However, there may be situations where you might consider personal loan cancellation after disbursement. It’s important to know that once the loan amount is disbursed, reversing the transaction can be complex and might incur additional costs.
In today’s fast-paced world, instant loan apps have made everything simpler. From approval to disbursal, the entire process is now just a few taps away. But life isn’t always predictable. Whether it’s a sudden change of plans or a financial rethink, there may come a moment when you need to cancel a personal loan, even after the money has reached your account.
At this stage, most lenders make the process complex. That’s because once the funds are transferred, the loan agreement is considered active, and reversing it often involves extra steps. Learn how you can cancel loan application.
How to Cancel Cancel Loan Application After Disbursement
If you’re contemplating whether can I cancel my personal loan after approval or even how to cancel personal loan after disbursement, follow these steps:
- Review Your Loan Agreement: Thoroughly examine your loan agreement to understand the terms and conditions related to cancellation.
- Contact Your Lender: Reach out to your lender for further enquiry. It’s crucial to communicate this promptly, especially if the loan has not been disbursed yet.
- Submit a Formal Cancellation Request: Provide a written request for loan cancellation to your lender, clearly stating your reason for cancellation. Ensure that your request addresses the specific query, such as can you cancel an approved loan.
- Settle Any Outstanding Amount: If the loan has already been disbursed, you may need to repay the disbursed amount along with any accrued interest. Confirm the exact amount with your lender and understand the implications of personal loan cancellation.
- Obtain Confirmation of Cancellation: Ensure that you receive a formal confirmation of loan cancellation from your lender. This confirmation should clearly state that your personal loan has been successfully cancelled. You should also receive complete details about any fees charged along with the final settlement amount(if applicable).
Also Read: Personal Loan Disbursement Process – How it Works?
Factors to Consider Before Cancelling a Personal Loan
Before deciding to cancel your quick personal loan online, consider the following:
- Timing: Whether you can cancel your loan or not largely depends on the stage of the loan process. Cancelling before disbursement is generally easier. However, once the loan has been disbursed, the process becomes more complex and may require repayment of the loan amount along with any accrued interest.
- Fees and Penalties: Understand the costs associated with cancelling the loan. Personal loan cancellation after disbursement may involve prepayment penalties and processing fees, which can add to the overall cost of the loan. It’s important to review your loan agreement for details on these charges before making a decision.
- Impact on Credit Score: Cancelling a loan can affect your credit score, especially if the process involves closing an account that was already opened. This can impact your ability to secure loans in the future and may result in higher interest rates. Therefore, it’s crucial to consider the long-term implications of loan cancellation on your credit health.
Understanding the Implications of Cancelling a Personal Loan
Cancelling a personal loan can have several implications that can affect you:
- Financial Costs: Can you cancel an approved loan without incurring costs? Typically, lenders charge a fee for personal loan cancellation, which can be a percentage of the outstanding loan amount. Additionally, if the loan has been disbursed, you may be responsible for repaying the principal amount along with any accrued interest.
- Alternative Arrangements: If you’re cancelling the loan due to a better offer, ensure that the new loan is more beneficial after considering all associated costs and terms. Compare the interest rates, fees, and repayment terms of both loans to make an informed decision. It’s also important to communicate with your current lender to understand the cancellation process and any potential consequences.
- Credit Score Impact: Can I cancel my personal loan after approval without affecting my credit score? Cancelling a loan after approval can lead to a temporary dip in your credit score due to the hard inquiry and the closing of a credit account. This can affect your ability to obtain favorable loan terms in the future.
Fees and Charges Associated with Loan Cancellation
When cancelling a personal loan after approval, be prepared for the following fees and charges:
- Prepayment Penalty: Most instant loan providers charge a prepayment penalty for early repayment of the loan. For example, if you have taken a personal loan up to 50000 and decide to cancel it after disbursement, you may be charged a penalty based on a percentage of the outstanding principal amount. This can significantly increase the cost of cancellation.
- Processing Fee: The processing fee paid at the time of loan application may not be refundable upon cancellation. This fee is an important consideration when determining how to cancel a personal loan application.
- Interest Charges: If the loan has been disbursed, you may be required to pay interest for the period the loan amount was in your possession. This is a crucial factor in personal loan cancellation after disbursement.
Impact of Loan Cancellation on Credit Score
In the short term, loan cancellation can lead to a slight dip in your credit score. This is because the loan application process involves a hard inquiry, which can temporarily lower your score. Additionally, if the loan was disbursed and then repaid immediately, it might be viewed as a credit utilisation event.
In the long run, the impact of cancellation on your credit score depends on how well you manage your finances post-cancellation. If you cancel your personal loan and then take out another loan or credit product, your credit score might be affected by the new application and any subsequent borrowing. However, if you manage your finances responsibly and avoid taking on unnecessary debt, your credit score can recover and even improve credit score over time.
Alternatives to Cancelling a Personal Loan
Before opting for personal loan cancellation, consider these alternatives:
Loan Restructuring
Discuss with your lender the possibility of restructuring your loan terms. This could involve extending the repayment period, reducing the interest rate, or adjusting the loan amount to better suit your financial situation.
Balance Transfer
If you find a lender offering lower interest rates on loan, consider transferring your existing loan balance to the new lender. This can help you save on interest payments and potentially reduce your monthly instalments.
Partial Repayment
If you have excess funds, you can make a partial repayment to reduce your loan balance and interest burden. This option can be more cost-effective than cancelling the entire loan.
How To Reapply After A Personal Loan Cancellation?
If you want to apply for a personal loan after cancellation, you need to consider a few factors before you apply for a loan again. Here are a few factors to consider for reapplication:
- Reason for Loan Cancellation: If you had to cancel the personal loan application due to a specific reason, address that. Make sure that the issue is resolved before you reapply.
- Credit Score: Improve your credit score to be eligible for the best loan plans.
- Time: Wait a few weeks or months before reapplication. Applying immediately after cancellation suggests financial indiscipline.
- Loan Amount: The EMI amount should be easy enough for you to pay each month along with your regular expenses.
Along with these measures, select the lender wisely. Each loan application kicks off a loan enquiry, affecting your credit score.
If you’ve cancelled your personal loan application and wish to reapply, begin with reviewing the reasons for cancellation. Few things to keep in mind are as follows:
1. Financial Situation: Check if your financial situation has improved or any financial strain that you were going through has been improved.
2. If you’ve cancelled your personal loan application and wish to reapply, start by reviewing the reasons for cancellation. Ensure that your financial situation has improved or any issues are resolved. To understand how to cancel a personal loan application, check with your lender for their specific procedures. If you’re wondering, “Can I cancel my personal loan after approval?” the answer is yes, but it may come with penalties. Once you are ready to reapply, submit a fresh application with updated documentation and details to increase your chances of approval.
Also Read: What is Personal Loan Repayment and Types of Loan Repayment Methods?
Conclusion
While cancelling a personal loan after approval is possible, it’s important to carefully consider the potential consequences, including fees and the impact on your credit score. Exploring alternatives like loan restructuring or balance transfer can provide more financially prudent solutions. Always communicate clearly with your lender and ensure you understand the terms and conditions before making a decision.
Frequently Asked Questions
The principal loan amount is the original sum borrowed from the lender. This is the loan amount owed to the lender, excluding interest rate, fees and other related charges.
Yes, you can cancel a personal loan after approval but before disbursal. Once the loan amount is disbursed to your account, cancellation becomes complicated and may require full repayment.
If the loan is not disbursed, cancellation usually does not impact your credit score. However, inquiries and approval records may still show up on your credit report.
Some lenders offer a 14-day “cooling-off” period during which you can cancel the loan without penalty. Check your loan agreement for this clause.
If the loan is approved but not disbursed, it may be cancelled without issue. If it’s already disbursed, you may need to repay the full amount along with applicable charges.
If “processing” means approval but before disbursal, cancellation is usually possible. Post-disbursal, it’s treated as a pre-closure or early repayment.
Yes, but early closure may come with prepayment charges depending on your lender’s policy.
Yes, before disbursal. After disbursal, you can repay the unused amount early, but it might still incur interest or charges.
Yes, as long as the loan is not disbursed. If already disbursed, compare total costs, and consider pre-closing the current loan and taking a new one.
Generally, no — as long as the loan was not disbursed or no defaults occurred. Multiple cancellations, however, might signal indecision to lenders.
Yes, withdrawal is possible if the funds are not yet disbursed. Once credited, it is treated as an active loan.
Some lenders may allow you to request a lower loan amount before disbursal. Post-disbursal, you can’t reduce it but can prepay part of it.
You will likely need to reapply or apply for a top-up loan. Increasing the amount post-approval is typically not allowed under the same application.
If you’ve signed and accepted the offer but haven’t received the funds, you can still decline. Post-disbursal, you’ll have to go through loan closure steps.
