Can I Cancel a Personal Loan After Signing?

By Ashley Kilroy. September 06, 2024 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.

Can I Cancel a Personal Loan After Signing?

It is possible to cancel a personal loan after signing the loan agreement. But ultimately, it depends on the lender’s terms and when you choose to cancel. Some lenders offer a “cooling-off” or grace period, giving you a little time to cancel the loan, while other lenders might be less flexible. The details of your loan agreement should outline your options when it comes to canceling your personal loan.

Before you decide, here’s what you need to know about personal loan cancellation and some other strategies to consider.

Factors to Consider Before Canceling a Personal Loan

Whether you can cancel a personal loan hinges on the loan details and when you choose to cancel. Personal loans can often be canceled if they’re not yet approved and the agreement hasn’t been signed. However, once the agreement is signed, you’re in a binding contract.

Some lenders offer a three-day grace period, in which you can cancel the loan for any reason. If the money hasn’t been deposited in your account yet, you might still be able to back out. To cancel, you’ll need to give the lender written notice as soon as possible.

Before deciding to cancel after signing, here are a few things to know:

Check for Additional Fees

If it’s past the cancellation period, early repayment could be an option. Certain lenders may charge a prepayment penalty, while others don’t.

Even if there is a fee, paying off the loan early can sometimes be the right financial move. Just compare the interest savings with the cost of the early payment fee to decide what’s best for you. A personal loan calculator can show you how much interest you can save by paying off your loan.

Adjust the Loan Terms

If you need to adjust the terms of your loan, consider a loan modification. This involves altering the existing loan agreement with the lender’s approval. Borrowers often seek one if they’re facing financial difficulties and want to avoid defaulting on their loan.

What Happens If You Decline a Loan?

If you apply for a personal loan and get approved, you don’t have to accept the offer — you can decline it. However, before you do, there are a few things to consider.

First, check if the loan you’re applying for has an application fee. Most lenders don’t charge one, but it’s important to verify. If there is a nonrefundable fee, be sure this is the lender you want to go with before applying.

Also, remember that submitting a personal loan application usually triggers a hard inquiry on your credit report, which can lower your score by a few points. Unlike soft checks, these hard checks add up and can further impact your score with each application. This can make it harder to get approved for new credit, and these inquiries stay on your report for two years.

Recommended: What Credit Score Do You Need for a Personal Loan?

How to Cancel a Personal Loan After Signing

If you’ve already signed your personal loan agreement and need to cancel, here’s how you can get started:

Review Your Agreement

Take a close look at your loan agreement to find your lender’s personal loan cancellation policy.

Know the Rules

Remember, loan agreements, repayment rules, and laws can differ depending on the type of loan.

Check for a Grace Period

See if your lender offers a short window to return the borrowed money. If the funds are already in your account, find out if you can give the money back. Keep in mind you might have to pay interest and possible penalties for early repayment. Your loan agreement should have all these details.

Prepare for Repayment

If you can cancel, be ready to repay the full loan amount, which will likely include extra fees and might end up costing more than what you originally received.

Understanding the Three-Day Rule

The three-day cancellation rule, also known as the “right of rescission,” is a consumer protection law from the Truth in Lending Act. It gives you three business days, including Saturdays, to change your mind about a loan.

However, this rule only applies if you used your primary home as collateral. It’s typically for mortgages or home equity loans, but it may apply if your home secures your personal loan.

Recommended: Guide to Personal Loans

Does Canceling a Personal Loan After Signing Affect Your Credit Score?

Canceling a loan typically does not affect your credit score as long as you don’t make a habit of it. However, the timing of your personal loan cancellation matters. If you stop the process before a hard credit inquiry, your score likely will stay the same. This is because when you apply for a loan, your lender conducts a hard inquiry, which will show up on your credit report and can slightly lower your score.

If you cancel the loan after it’s approved, the initial application may have already impacted your credit score. That said, canceling the loan at this point won’t result in extra harm to your credit score.

The Takeaway

You can cancel a personal loan after signing the agreement, as long as your lender allows you to do so. While some lenders offer a grace period — giving you the option to cancel for any reason without fees — other lenders may not be as flexible. That’s why it’s important to check your loan agreement to understand your options.

Remember, before making any decisions, be sure you understand the process and any fees or costs involved. Familiarizing yourself with these details will help you make an informed decision about whether to cancel your personal loan and how to go about it.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can a personal loan be canceled after approval?

Whether you can cancel a personal loan after approval depends on the lender’s terms. Some lenders offer a grace period for cancellation, while others have stricter policies. Check with your lender to see what options are available.

Does canceling a loan affect your credit rating?

Canceling a loan affects your credit rating, but only if the lender has already done a hard credit inquiry. If you cancel before the inquiry, there’s no impact. If you cancel after approval, the inquiry may have slightly lowered your score, but canceling the loan won’t cause further damage.

Is there a grace period for canceling a loan?

Certain loans offer a three-day grace period in which you can cancel for any reason without fees or interest (as long as you return the money). After this period, canceling may not be possible. It all depends on the lender’s terms and timing.


Photo credit: iStock/pixdeluxe

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL-Q324-012

TLS 1.2 Encrypted
Equal Housing Lender