A personal loan typically ends when the borrower completes repayment of the loan amount, including any interest and fees, in accordance with the terms and conditions outlined in the loan agreement.
There are several common ways in which a personal loan can end, depending where you’re at with repayments.
Early bird
Depending on the terms and conditions of your loan, you could wrap things up with a final lump sum payment (without penalties or fees) and notify your lender via their preferred contact method (eg internet banking system, email, call).
If your lump sum payment wasn’t enough, the lender sends you a quote and once it’s paid, they cancel the direct debit and close your account.
On schedule (aka full repayment)
If you’ve made your final scheduled direct debit payment, you don’t need to do anything else.
The lender usually finalises the loan by cancelling your direct debit and sending you a letter confirming the closure of your account. If not, you’ll be chasing them up.
Struggling (aka loan default)
If you don't repay the loan, the credit provider must send a default notice giving you a minimum of 30 days to pay the outstanding amount you owe.
If you're still behind after that notice expires, your lender might commence court proceedings (for an unsecured loan or if the security doesn’t cover the cost of the loan).
By law, your lender is required to consider your request for a flexible payment arrangement if you’re experiencing financial hardship.
If you are, contact the National Debt Helpline (it's free) on 1800 007 007.
Loan discharge or forgiveness
In certain situations, such as bankruptcy or specific loan forgiveness programs, a personal loan may be discharged or forgiven. This typically occurs under specific legal circumstances or eligibility criteria defined by the lender or relevant authorities.