Close On a Loan

Close on a loan summary:

• At closing, you sign the loan agreement and pay closing costs, and the lender transfers the money. 

• In the case of a mortgage, closing is when you get the title and keys to your new home.

• Closing is your last chance to review the loan and make sure everything is correct.

Close on a loan definition and meaning

To close on a loan means to finalize the loan. It is the last step in the process of getting a loan.

When you close on a loan, you'll sign the loan agreement. At this point, you become legally obligated to repay the loan according to the terms of that agreement. 

The loan can't be paid out until closing. In the case of an auto or home loan, you also won't get your title and keys until closing.

Key concept: The final step in a loan agreement.

Close on a loan: a comprehensive breakdown

While the specific process can vary by loan type, on closing day you'll typically:

1. Review the loan agreement. Closing is your last chance to make sure all of the paperwork says what you expect it to say. Review rates and terms for any errors and don't sign if something looks amiss.

2. Sign the documents. If everything looks good, it's time to sign. For a personal loan, this may just be a few pages for the loan agreement. For a home purchase, the paperwork pile is much larger, including things like the loan agreement, title documents, and various financial disclosures.

3. Pay closing costs. Closing costs are all the fees associated with finalizing your loan.

4. Money is transferred. The lender will initiate the transfer and/or present a check. In some cases, it may still take a day or two for the money to clear your bank account.

5. You get the title and keys. If you're buying a vehicle or home, this is when you finally get the title and keys to your new purchase.

6. Celebrate! You made it to closing, congrats!

Close on a loan: key components

Many loans include some kind of closing costs, including personal loans, auto loans, and home mortgage or home equity loans. The specific closing costs can vary by loan type.

For personal loans, closing costs may simply include the origination or loan fees. These are often taken out of your loan when it is disbursed, so you may not need to pay them out of pocket.

What are closing costs for a mortgage?

Closing costs for a mortgage or home equity loan can include many different fees, such as:

• Appraisal fee

• Home Inspection fee

• Credit report fees

• Loan origination fee

• Title insurance

• Escrow fee

• Closing attorney fee (varies by state)

• Courier fees

• Bank processing fees

• Recording and notary fees

• Mortgage points

You can sometimes roll in your closing costs, meaning you’ll add them to your loan principal. Otherwise, you'll typically need to show up to closing day with a cashier's check.