Personal loans can be a go-to credit instrument during financial emergencies, as they are easily and widely available and can be obtained quickly. However, at times, after receiving a personal loan, the financial emergency may no longer be there or may have been postponed. In such a scenario, the borrower is left with no choice but to cancel the loan. In this article, we will examine the personal loan cooling-off period and the cancellation charges for various banks.
What is the cooling-off period?
In a personal loan, the cooling-off period is a specified time period within which a borrower can cancel the loan, if required. The cooling-off period differs among banks and NBFCs. Usually, it ranges from 3 to 15 days from the date of the loan disbursement. The cooling-off period is also known as the look-up period.
Personal loan cooling-off period and cancellation charges
Let us look at the cooling off period for personal loans and the cancellation charges for various banks and NBFCs.
ICICI Bank: The cooling-off period or the free look period is 15 days from the date of personal loan disbursement. The personal loan cancellation charges are nil if the loan is cancelled within the cooling-off period. However, the processing fee will be non-refundable.
If the personal loan is cancelled after the cooling-off period is over, a cancellation fee of Rs. 2,500 is applicable.
Kotak Bank: For personal loans availed of digitally, the cooling-off period is the transaction plus four days. For personal loans availed of digitally, the cancellation charges within the cooling-off period are nil. If a digitally availed personal loan is cancelled after the cooling-off period, the cancellation charges are Rs. 1,000 + GST or 1% of the principal outstanding + GST, whichever is higher.
For non-digital personal loans obtained through offline channels, no cooling-off period is applicable. The personal loan cancellation can only be done before the first EMI date. The cancellation charges are Rs. 1,000 + GST or 1% of the principal outstanding + GST, whichever is higher.
IDFC FIRST Bank: The cooling-off period for the FIRSTmoney Smart Personal Loan is 3 days. If the personal loan is cancelled within the cooling-off period, there are no cancellation charges.
HDFC Bank: A borrower can cancel the personal loan within the cooling-off period or look-up period from the loan disbursement date. The customer will have to bear the interest charges from the date of disbursement until the date of loan cancellation. The processing fees, stamp duty, other statutory charges, and GST are non-refundable. These charges will not be waived or refunded in case of loan cancellation.
After cancellation, if the personal loan needs to be rebooked, the charges applicable will be Rs. 1,000 + GST.
Tata Capital: The cooling-off or look-up period is 3 days from the date of personal loan disbursement. During the cooling-off period, the borrower will not be charged any penalty for prepayment of the personal loan. After the cooling-off period, the cancellation charges for the personal loan are 2% of the loan facility or Rs. 5,750, whichever is higher.
SMFG India Credit: A personal loan can be cancelled before the first EMI. The loan cancellation charges are Rs. 1,000 + GST.
HDB Financial Services: The cancellation fee for a personal loan is Rs. 1,000 + GST.
Moneyview: A borrower can cancel the personal loan at any time before it is disbursed. However, if the personal loan needs to be cancelled after the loan amount has been credited to the borrower’s bank account, it can be done within the cool-off period of three working days.
Hero Fincorp: When a personal loan cancellation is done through the online loan App, there are no cancellation charges. The interest amount paid is non-refundable.
The loan processing fee is a minimum of 2.5% + GST. The processing fee is deducted from the loan amount at the time of disbursal. The processing fee is non-refundable in the event of cancellation of the personal loan.
What to do if the personal loan has to be cancelled?
After taking a personal loan, it may sometimes happen that the purpose for which the loan was taken has been postponed or no longer there. It requires the personal loan to be cancelled. In such a scenario, check the tenure of the cooling-off or look-up period and determine whether it is still valid.
The cooling off or look-up period varies among banks and NBFCs, and is usually between 3 to 15 days from the date of disbursement. Check if there are any cancellation charges during the cooling-off or look-up period.
Some banks and NBFCs don’t levy cancellation charges if the loan is cancelled during this period. However, most banks and NBFCs will not refund the processing fees even if the loan is cancelled during the cooling-off or look-up period.
If the cooling-off or look-up period is already over, check how much the cancellation charges are. If the cancellation charges are high, contact the bank/NBFC and request a waiver of the cancellation charges. If they agree, you will save on these charges. However, if the bank/NBFC doesn’t agree, you will be left with no choice but to pay the loan cancellation fee.
Submit the duly filled personal loan cancellation request form to the bank. Repay the loan amount through cheque, fund transfer, cash deposit at the branch, etc., and take an acknowledgement. On receiving the loan amount, the bank will process the personal loan cancellation request. Once the loan is cancelled, the bank will send you a communication confirming the loan closure.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.
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