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Understanding Cooling-off Period in Personal Loan 

Understanding Cooling-off Period in Personal Loan 

Thinking of taking a personal loan? Don’t rush. When borrowing money through personal loans, don’t just think of interest rates; there’s more. That’s where the cooling-off period comes into the picture. A brief window for the borrower to rethink their financial decisions.

Wondering about the cool-off meaning? It acts like a safety net, giving borrowers a chance to reconsider before finalising the agreement. Let’s understand the cooling-off period in personal loans before it becomes legally binding.

What is cooling-off period in personal loans?

The cooling-off period in personal loan is a short and legally enforced timeframe after the loan agreement that allows you to cancel the loan without any charges or penalties. The cooling period is an important safeguard, giving you time to reconsider before finalising a financial decision. If you cancel the loan within the cooling-off period, the agreement is considered null. Any processing fees that you have paid during this period are usually refunded.  

Process for loan cancellation

To understand cool-off meaning in personal loans, look at it as a brief period in which you can cancel the loan. The cancellation process is straightforward and is explained below – 

1. Initiate cancellation request: You must notify the lender to cancel your loan during the cooling-off period. 

 2. Submit required documentation: To process the cancellation, you must provide the necessary details, including the loan account number and identity proof. 

3. Return of disbursed amount: During the cooling-off period in personal loans, you must repay the entire loan amount disbursed by the lender to cancel the loan.   

4. Review and validation:  To cancel the loan, the lender will review your submitted cancellation request and the supporting documents.

5. Confirmation and documentation: Once approved, the lender typically cancels the loan, halting any further deductions. 

6. Post-cancellation consideration: After cancellation, check your credit score to see if the loan has been marked as cancelled. Cancelling the loan within the cooling-off period doesn’t impact the credit score. 

Personal loan cancellation: Credit score impact

Before cancelling the loan, it is crucial to understand how it can impact your credit standing. Here’s a breakdown of how cancelling during the cooling-off period in the personal loan can affect your credit profile: 

  • Not reported active:  Since the loan was cancelled during the cooling-off period, it does not show up as an active account in your credit report.
  • No negative impact:  If cancelled during the cooling-off period, the loan will not harm your credit score because there were no payment defaults.
  • Treated as non-existent: The loan is considered void since it was cancelled before you made any payment.
  • Credit bureaus are informed: The lender will update the credit agencies to suppress the loan entry, ensuring it does not affect your credit score. 

When to cancel a personal loan?

You can use the cool-off period to cancel a loan for various reasons. For example: 

  • Second thoughts before borrowing: During the cooling-off period, you may reconsider your decision, realising that the loan might be an unnecessary financial burden. 
  • Found better loan terms: During the cooling-off period for personal loans, you may discover a lender offering better loan terms or interest rates.
  • Change in financial situation: A sudden job loss or change in income can make it difficult to manage loan repayments, making cancellation during the cooling-off period a more practical choice. 
  • Avoid long-term financial burden: During the cooling-off period, if you find the loan agreement to be overwhelming, cancelling it early can help avoid a long-term financial commitment. 

Conclusion 

When you take a personal loan, it is crucial to understand the cool-off meaning. It acts as a safeguard, allowing you to reflect on your financial decisions and cancel the loan without any penalties if needed.
Looking to secure a personal loan? Apply online with Tata Capital to enjoy attractive interest rates, flexible terms, and long repayment tenures. Visit the official website or download the mobile app to apply now.

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FAQs

Can I cancel personal loan after accepting?

 

Yes, you can cancel a personal loan after accepting it, provided it is within the cooling-off period. This is usually a brief window of 7 to 14 days, during which you can return the amount without any charge or penalties.

Can we close a personal loan in 2 months?

 

Yes, you can close a personal loan in 2 months through prepayment. However, lenders may charge a prepayment or foreclosure fee depending on the terms. So, always check the lender’s prepayment policy before closing it early.

Can I cancel my personal loan after approval?

 

Yes, you can cancel a personal loan after approval. It can be done before or shortly after the disbursement of the money, ideally during the cooling-off period. If the loan has already been disbursed, you must return the entire loan amount promptly.

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