Can I Return or Cancel a Personal Loan After Signing?

Jason SteeleUpdated August 23, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

There are many reasons that you may have taken out a personal loan. Maybe you needed to pay a medical bill or had an emergency car repair that needed to be done. However, if you are now having second thoughts or your situation has changed, you may now be wondering if you can return or cancel your personal loan.Keep reading to learn if you can cancel a loan after you’ve already signed for it, what factors to consider before canceling, if canceling a loan hurts your credit score, and more.

Can I Cancel or Return a Personal Loan?

Returning or canceling a personal loan will depend on the type of loan and the timing. If the loan hasn’t been approved yet and the loan agreement hasn’t been signed, you may be able to cancel the loan. However, after the loan money has been dispersed, you can’t cancel the loan.If you need to change the terms of the loan, you could look into doing a loan modification. A loan modification is a change to the terms and conditions of an existing loan agreement that is agreed upon by both the borrower and the lender. A borrower may want to do a loan modification if they are experiencing financial hardship and want to avoid defaulting on a personal loan.

Factors to Consider Before Canceling a Loan

Even if you no longer need the loan, it may not make sense to cancel it. Here are some factors to consider before deciding to cancel or return your loan.

The Type of Loan You Have

Before canceling a loan, you should consider what type of loan you have. Some loans, like payday loans, have cooling-off periods. During that cooling-off period, you can cancel the loan for any reason. You won’t be charged fees or interest, but you will need to give the money back. After the cooling-off period, you may not be able to cancel the payday loan.

If You Should Pay the Loan Off Early

If it is too late to cancel the loan, you may be able to pay off the loan early. Some lenders may charge additional fees, like an early termination fee, to pay off your loan early, but other lenders do not charge early payment fees. Even with paying an early termination fee, though, sometimes paying off the loan early may be the right financial decision for you. Compare the interest you would be saving by paying off the loan early with the cost of the early payment fee.

What Happens to Loans If the Borrower Passes Away?

If you are concerned about what happens to loans when the borrower dies, the answer will depend on the type of loan. In general, debts are paid from the estate of the deceased person. If there isn’t enough money in the estate, the debts may go unpaid, except in certain situations where someone else is personally responsible for the debt. Cosigners, joint account holders, people who didn’t follow probate laws, and spouses living in community property states can all legally inherit debt from a deceased person.

How to Cancel a Personal Loan

How to cancel a personal loan may depend on how you applied for the loan. If you applied for the personal loan online, you can withdraw or abort the personal loan procedure at any step before final approval of the loan. Once the loan approval is received and you have received the funds, you may not be able to cancel the loan. If you applied for the personal loan without instant loan apps, you should contact the lender to let them know that you wish to cancel your loan. You can contact the lender by phone, email, or mail. The letter or email should explain your reasons for wanting to cancel the loan and it should ask for the lender’s cancellation procedure. If you have a personal loan manager for your personal loan, you should contact that person to discuss steps for canceling the loan. The personal loan manager may be able to help you with the process.

Does Canceling a Personal Loan Hurt Your Credit Score?

Canceling a personal loan is different than defaulting on a personal loan. When you default on a personal loan, you are failing to make a payment in accordance with the signed loan agreement. Defaulting on a personal loan can have a large negative impact on your credit score. The act of canceling a loan doesn’t impact your credit score, as long as you don’t do it frequently, but it depends on when in the loan process you cancel.If you cancel the loan application before a credit inquiry is made, your credit score won’t be impacted. When you apply for credit, a hard inquiry will be placed on your credit report. This will have a small, negative effect on your credit score. If you cancel the loan application after it has been approved, your credit score will have already been impacted from the loan application. Canceling the loan won’t have a further impact on it, though. Recommended: How a Personal Loan Can Affect Your Credit Score

The Takeaway

Although possible, canceling a loan shouldn’t be something that you do often. Before applying for a personal loan, make sure that it is the right decision for you. Be sure to read the entire loan document before signing, including the fine print. The loan agreement will also have important information about fees, cancellations, and early repayment of the loan. If you do need to cancel a loan, it’s best to do so before the money is dispersed. If the money has already been dispersed, consider a loan modification, which is a change to the terms and conditions of an existing loan agreement. You can also consider paying the loan off early.On the other hand, if you are looking to apply for a new personal loan, Lantern by SoFi can help. Lantern lets you compare the top personal loans to find the one that is right for you.Lantern can help you compare rates and find loan offers in minutes.

Frequently Asked Questions

Can I cancel a loan after the cooling-off period?

Will canceling a loan affect my credit score?

How long does it take to cancel a loan?

Can I return a loan if I don't use it?

What are the consequences of returning a loan?

Photo credit: iStock/fizkes

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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