Stuck with a personal loan? You can cancel it during the 'cooling-off period,' but only a select few know about this option..

Sometimes, we take out a personal loan in a hurry or due to an emergency. But what if, after the loan amount is credited to your bank account, you realize you no longer need the money? Or what if the purpose for which you took the loan is now postponed? In such a situation, there's no need to panic. In the banking world, there's a rule called the 'cooling-off period' or 'look-up period'.

This is a period during which you can return your loan and cancel it. In simple terms, it's like 'returning' an item after purchasing it. However, banks have certain terms and conditions for this.

What is the cooling-off period?

This is the time limit (usually 3 to 15 days) within which you can inform the bank that you no longer need the loan. If you cancel the loan during this period, the bank will charge you very little or no cancellation fee. Let's look at the rules of major banks and companies.

Things to keep in mind when canceling a loan:
Processing fees will be forfeited: Almost all banks do not refund the 'processing fee' when a loan is canceled. This money is deducted from your loan amount beforehand.

Interest charges: Some banks will charge you interest for the number of days the money was with you.

Government charges: Government taxes like stamp duty and GST are also not refunded.

What to do if you want to cancel the loan?
First, check the time limit: See if you are still within the cooling-off period.

Talk to the bank: If the time limit has passed and the charges are very high, request that the bank reduce the charges.

Fill out the form: Go to the bank and fill out the 'Loan Cancellation Request Form' and deposit the outstanding amount via check, fund transfer, or cash.

Get a receipt: After depositing the money, be sure to get a confirmation letter or receipt from the bank stating that your loan account will be closed.

Taking out a personal loan is easy, but canceling it can be quite complicated. Therefore, it's wise to inquire about the 'cooling-off period' before signing the loan agreement. If your need for the loan has ended, inform the bank as soon as possible to avoid hefty penalties. A little precaution can save you thousands of rupees.

Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.