Question

What two transactions take place in the loan closing

Answer 1

Solution:-

The two primary transactions that take place in loan closing are as follows:

1. Clearance of all financial dues by the borrower: As part of the loan closure process, the borrower repays any dues pending under the terms and conditions of the loan which include but are not limited to the following:
   • Interest
   • Principal
   • Prepayment/foreclosure charges levied by the bank
   • Processing charges
   • Other miscellaneous charges
2. The second most important transaction under the loan closure process is the clearance of bank's lien over any property kept as mortgage under the loan arrangement. For example: A car under the car loan, house under a housing loan, gold under gold loan, etc. This also includes discontinuation of any personal guarantees offered by the borrower under the loan arrangement. Thus, this frees borrower from any right that the bank may have held on any of his assets or enforcement of any liabilities. The same shall be duly reflected on relevant ownership documents such as property title deeds, car registration document, etc

Once the loan is closed, the borrower would get a 'No dues certificate' from the lender which acts as a proof that the loan account has been closed.