Crucial circumstances like unexpected medical costs, car accidents or property damage can send you in a pitfall of financial instability. These are some situations when you consider getting a personal loan to manage your expenses. However, if you feel that you’re unable to repay the loan amount or cannot afford the regular installments, or if you’ve found a better loan deal with lower interest rates, you might reconsider its application and procedure. Once you’ve registered and applied for a personal loan, there are still chances of withdrawing and canceling the loan.
What is a personal loan and what are the eligibility criteria?
Before skipping to the cancelation process, let’s first understand how personal loans are granted and the eligibility criteria behind them. A personal loan is an agreement between you and a bank or a lender that allows you to borrow money for a certain period of time, on the condition that you repay the entire amount in fixed installments. You can also take a personal loan from private organizations that are in this business for many years, such as a credit union. It’s usually issued without considering any asset or putting any collateral, and thus the interest rates are usually higher.
The criteria used to check your eligibility includes your credit score (which is the most important factor for loan approvals), your employment status, your income level, and your repayment ability. The banks or lenders also check your residence, and whether you’re self-employed or work in an organization. You can also take a loan with the help of a guarantor, wherein a person vouches for you to repay the loan on time. The usual time period of a personal loan varies according to the situation, but is usually between 1 to 5 years.
How does the personal loan cancelation process work?
When you decide to take a personal loan, you need to fill in a few forms and allow the bank to contemplate on the sanctioning process. Once your loan is approved, the bank or lender usually releases the amount in your bank account within 7 to 10 days of the approval.
The limitations of the personal loan cancelation procedure depends on the stage at which you decide to cancel the loan. When the bank has already sanctioned the loan amount and deposited the money in your account, there’s not much you can do about it. But if you’re trying to return a personal loan while it’s in the initial stage, which is before signing the paperwork and the release of the loan amount, you can request the organization to cancel the process. Understanding a few terms and guidelines within the personal loan cancelation process can help you get a clear picture before you make a final decision.
Make use of the cooling-off period
A cooling-off period refers to a certain period of time that is given to the borrower in which they can cancel the personal loan process. Generally starting from 2 days and extending up to 14 days, you can withdraw your name and application via a phone call, an email or in person, depending on your loan situation. However, it is only limited to a certain amount of money that has been requested. Any amount higher than that cannot be canceled. Before signing the contract, go through the clauses attentively to understand more about the cooling period and to avoid mistakes.
Providing the notice of withdrawal
After you’ve known the cooling period that applies in your situation, you can submit a notice of withdrawal. As mentioned above, you can provide a notice of withdrawal in person, or request for the cancelation procedure verbally over a phone call or an email. You will have to provide all your personal information concerning the loan procedure such as your name, date of birth, social security number, address, application number, etc.
Refunds and penalties
All organizations and banks request an application fee to process and sanction a personal loan. While a few lenders deduct the amount from the requested loan amount, a few ask for it beforehand. You will either be penalized for canceling a financial agreement, or you would not receive the application fee as it will go directly in the processing of the application.
Even though the lender or bank doesn’t ask for a reason for your withdrawal, you can provide them with one if you’ve found a better deal or a lender that offers a lower interest rate. It can urge your bank to arrive at a bargain, making the procedure simpler for you. While withdrawing the loan application, you need to be aware of all the hidden clauses to avoid any penalties.