Canceling your loan application can be done in several ways. You may have applied for a loan when you needed financing, then met that need by another means or changed your mind about taking the loan. In such cases you have the right to cancel your loan application. You can use the bank channels where you applied. The methods you can use to cancel a loan application are listed below:
- SMS banking,
- Internet banking,
- ATMs,
- Bank branch.
You can cancel your loan application using these channels. However, there is another important detail to know first. When you apply for a loan and your application receives preliminary approval from the bank, the bank may request certain documents from you. The bank typically gives customers 10 to 14 days to submit these documents. If you do not deliver the required documents within that period, the loan application will be automatically canceled. In some loan types the bank may not request any documents; in those cases the approved loan amount could be transferred directly to your account. Therefore, failing to provide documents does not always result in automatic cancellation of the application.
How to Cancel a Loan Application via SMS, Internet or ATM Banking
You can cancel a loan application using SMS, Internet or ATM banking. It is usually easiest to cancel the application through the same channel you used to apply. There are some conditions to keep in mind. When you apply, the bank first performs a preliminary assessment. A preliminary approval does not always mean the loan has been fully granted. For some loan types banks may not request documents; in such cases an online contract may complete the process and the funds can be transferred directly to your account. This does not apply to every loan type. Generally, if your application receives preliminary approval you will need to submit the requested documents to a branch to finalize the loan.
If you applied for a loan and received preliminary approval, the bank will request certain documents. This process covers a period of 10 to 14 days. During this period you can cancel your loan application through the channel you used to apply.
How to Cancel a Loan Application via Telephone Banking
Requesting cancellation through your bank’s telephone banking is one of the most reliable methods to ensure your loan application is canceled. This falls within the same 10 to 14 day period the bank allows for document submission. During that time you can call your bank’s customer service. Inform the representative that you want to cancel the loan application and the agent will start the cancellation process.
How to Cancel a Loan Application at a Bank Branch
To cancel a loan at a branch, if you apply before the loan is fully approved, you only need to complete a loan cancellation form. Submit the signed cancellation form to the authorized staff at the branch where you applied and the bank will process the cancellation. If your loan already has preliminary approval you can still visit the branch and complete the same cancellation form with the branch staff in order to cancel the application. After processing, the loan application will be canceled.
How Long Is the Cancellation Period?
The period allowed to cancel a loan is 14 days. If your loan received final approval, you submitted the required documents, signed the loan agreement, and the funds were transferred to your account, you have 14 days to cancel the loan. It is essential that you have not used the loan funds. If you have not touched the borrowed money, you can withdraw from the loan within 14 days without providing a reason and without paying a penalty. The 14-day period begins on the day the contract is signed.
If you notify the bank that you are withdrawing from the loan, you must repay the principal and the interest accrued from the date the funds were transferred until the principal is returned to the bank. The bank typically gives you up to one month to make this repayment. During this one-month period you must pay the bank the amount requested, including principal and interest accrued up to the repayment date.
When you withdraw in this way, apart from interest and amounts paid to institutions or third parties, you do not owe the bank any other fees. The bank cannot demand any additional charges beyond these items. If any other fees are claimed, the bank must refund those amounts within one week after you repay the principal and accrued interest.
What If the 14-Day Period Has Passed?
If the 14-day period has passed, you cannot cancel the loan in the same manner. If the loan was approved, required documents were submitted, the agreement signed and the funds transferred, you must apply to the bank within 14 days from the contract date to cancel the loan. If that 14-day window has elapsed, you cannot cancel the loan under the withdrawal rights described above.
Even if cancellation under the 14-day right is no longer possible, you may still be able to close the loan early. In that case you must pay the interest accrued up to the date you close the loan and any expenses the bank incurred in preparing the loan. This option generally does not apply to mortgage loans; it is available for most other loan types.
Mortgage loans are treated differently. If you took a mortgage loan and the 14-day cancellation period has passed, closing the loan requires paying the accrued interest up to the closing date and the bank’s loan expenses. In addition to these payments, mortgages usually require an early repayment penalty known as the “Early Closure Fee.”
How Much Is the Early Closure Fee for Mortgages?
The Early Closure Fee applies only to mortgage loans. If you used a loan product other than a mortgage and missed the 14-day cancellation window, the bank cannot charge you an Early Closure Fee. However, if the 14-day period has expired for a mortgage, you are obliged to pay the Early Closure Fee when closing the loan. The fee is calculated based on the remaining loan term.
If the remaining term of your mortgage is less than 36 months, the early closure fee equals 1% of the outstanding principal. If the remaining term exceeds 36 months, the bank may charge 2% of the outstanding principal. This amount is collected in full by the bank processing the loan closure.