New Delhi. Personal loan is the fastest available financial product today. Be it a medical emergency, important household expenses, vacation plans or payment of a big bill, the loan gets credited to your account within a few minutes. But many times this loan taken in haste turns out to be heavy later. The situation changes, expenses are postponed or a better offer is received and then one regrets that he had not taken the loan.
For such situations, banks and NBFCs provide a cooling-off period i.e. an opportunity to cancel the loan for free. This is a kind of customer protection feature, under which you can return the loan within the stipulated time and can also cancel it without any charges.
What is the cooling-off period?
The cooling-off period is the time when you can re-check the loan terms, EMI, interest rate, processing fee – everything. If you feel that the loan is not right or not needed, you can cancel it. This period varies from bank to bank but is usually between 3 to 15 days. In many places it is also called free look period.
Purpose of cooling-off period
- Giving the customer a chance to reconsider a hasty decision
- Providing options to the customer in changing circumstances
- Providing relief from bad advice, miscommunication or hasty loans
Why is there a need to cancel the loan?
- Avoidance of medical or family expenses- If operation, travel or major expenditure has been postponed, then the need for loan may also be eliminated.
- Better offer than any other bank- Low interest rate, low processing fee or better terms, in such a situation people want to take a new and cheaper loan.
- Not liking the terms- Sometimes after looking at the documents it is found that the EMI is high, the interest rate is higher than expected or other charges are heavy.
- Getting money from other places- Bonus, salary advance, incentives, help from family. This eliminates the need for loan.
- Worse financial situation- Taking a loan due to salary cut, job loss, EMI load etc. can prove to be a mistake.
- After thinking again, it seemed that there was no need- Many people take a loan out of enthusiasm but later feel that they can manage without a loan.
How to cancel the loan?
It is very easy to cancel the loan during the cooling-off period. Just follow these steps-
1. Read the loan agreement- First of all, see how many days of cooling-off period your bank gives and what are the conditions.
2. Inform the bank immediately- You can submit a cancellation request in the following ways-
- Written application in bank branch
- Request on bank website/app
- customer care call
3. Return the entire loan amount- If the loan has been disbursed then it will have to be returned.
4. Get cancellation confirmation from the bank
Will there be any charge?
Loan cancellation within the cooling-off period is completely free but the processing fee is not refunded. Charges may apply after the cooling-off period ends. Therefore it is important to submit the request on time.
What will be the impact on credit score?
The good thing is that if you have canceled the loan during the cooling-off period, the impact on the credit score is minimal. Credit score recovers quickly. If the loan was only at the application stage and not disbursed, there would be no major impact on the score.
Should you cancel the loan?
If circumstances have changed, there is no need to spend or a better offer has been received, then yes, canceling the loan is the right decision. During the cooling-off period, you get the opportunity to stop the loan without any penalty and additional charges. There may be a loss due to processing fees, but this loss is very small due to getting stuck in EMI by taking the wrong loan.
