Is Blank Cheque Required For Personal Loan?

Let me help with: Is blank cheque required for personal loan? In India, providing a blank cheque is a common practice when applying for a personal loan, especially with traditional banks and some non-banking financial companies (NBFCs). A blank cheque is a signed cheque where the amount and payee details are left blank. Lenders often request such cheques as a form of security to ensure repayment.​

Why is Blank Cheque Required for Personal Loan?

1. Lenders use blank cheques as a safeguard against defaults. If a borrower fails to repay the loan, the lender can fill in the cheque with the outstanding amount and deposit it.​

2. Blank cheques help verify the borrower's bank account details, ensuring that EMI deductions are made from the correct account.​

While this practice is widespread, it carries certain risks:​

1. If not handled properly, there's a risk that the cheque could be misused, leading to unauthorized withdrawals.​

2. If a cheque bounces due to insufficient funds, it can result in legal action under the Negotiable Instruments Act.​

Hence, only provide the number of cheques that are absolutely necessary.​ This restricts the cheque from being endorsed to another party.​ Always get a written acknowledgment from the lender stating the purpose of the blank cheque and the conditions under which it will be used.​ Regularly check your bank statements to ensure there are no unauthorized transactions.​

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What Documents Required For Personal Loan? 

In India, the requirement of a blank cheque for a personal loan depends on the lender’s policy. If you want to know is blank cheque required for personal loan, let me tell you that many traditional lenders like banks and NBFCs may ask for post-dated or blank cheques as security. However, digital lenders often do not.

Is it Required to Submit Blank Signed Cheque for Personal Loan?

Banks or NBFCs may request a blank cheque as a form of repayment assurance. It is often used as collateral to enforce repayment in case of default. Some lenders prefer post-dated cheques for each installment instead of a blank one.

Online loan providers usually do not require a blank cheque due to automated repayment methods like ECS (Electronic Clearing Service) or NACH (National Automated Clearing House). Digital lenders rely on your bank account’s standing instructions for repayment.

Giving a blank cheque has legal risks under Section 138 of the Negotiable Instruments Act, as it can be misused if terms are unclear. `Borrowers should ask for a written acknowledgment or terms regarding the cheque’s use.

Ensure it is given only to reputed lenders. Write “Account Payee Only” or limit its use to safeguard against unauthorised withdrawals. Retain a record of the cheque number and seek legal advice if unsure.

I hope you found this informative.

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