Banks and non-banking financial companies often require blank cheques from personal loan applicants. The cheque must be signed by the account holder. However, it does not have to include the name of the payee or the amount. This blank cheque is purchased as a precautionary measure to avoid default in loan repayment.
Apart from the signature of the account holder, the details of the payee or the amount are not required on the blank cheque. In some cases, the date may be required. The name of the payee and the amount are usually not filled in. They are filled in later by the payee.
It is important to note that a blank cheque is not always mandatory for getting a personal loan and it may vary depending on the lender’s policies. Blank cheques are usually required to ensure that lenders do not lose their money. Some financial institutions use this check to collect the outstanding amount from the borrower’s bank account in case of default. Financial institutions see a blank check as an assurance that the borrower will repay the loan in full. It also prevents borrowers from intentionally defaulting.
Are there any disadvantages to issuing a blank check? A blank check, which does not have the name of the payee or the amount, can be misused if it falls into the wrong hands. To avoid fraudulent use, borrowers should ensure that a copy or record of all checks issued to the bank or NBFC is kept.
If you take a secured personal loan (such as a gold loan or a loan from an FD), the lenders do not require a blank cheque as they have collateral.
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