Foreclosure Charges for Personal Loans – Complete Fee Breakdown

Personal loan foreclosure means closing your loan early by paying the full outstanding amount. The foreclosure of loan process is simple. You request a foreclosure statement, check the dues and charges, make the final payment and get a closure confirmation or NOC from the lender.

Foreclose loan means closing your personal loan before the scheduled end date by paying the entire outstanding amount at once. Many borrowers choose this to reduce their interest payout.

As per RBI rules, lenders cannot charge foreclosure fees on floating-rate personal loans. For other loan types, lenders may apply personal loan foreclosure charges. These usually range between 2% and 6% of the remaining balance. Certain lenders do not levy any foreclosure charges on personal loans. You can apply personal loan with no foreclosure charges to save on interest costs. 

Understanding what is foreclosure charges can help you calculate the real cost before you decide to foreclose. To know more about how these personal loan foreclosure charges apply, read on.  

What is the Meaning of Personal Loan Foreclosure? 

To foreclose your loan means you pay the entire outstanding amount in one go, instead of continuing with monthly EMIs. If you receive a bonus, salary hike or lump-sum money, foreclosure can be a smart move. It helps you reduce long-term interest and become debt-free sooner.

But, before you close your loans early, understanding foreclosure charges meaning is very important. Always check these charges, the process and any conditions in advance so you can decide if foreclosure is the right move for your finances.

What are Pre-Closure Charges on Personal Loans?

Many lenders apply a small fee to cover their interest loss. Here are the common charges lenders may apply:

• Foreclosure fee: Usually 2%-6% of the outstanding loan amount
• GST: Charged on the foreclosure fee
• Overdue penalties: Added only if any past EMIs are pending
• Miscellaneous fees: Rare costs like statement or document charges

Foreclosure Charges by Lender

Here’s how personal loan foreclosure charges can look across different lenders:

Lender Type	Typical Charges	When It Applies
Bank ‘A’	3% of outstanding balance	After the first 6-12 months of the loan
NBFC ‘B’	4%-6% of outstanding balance	Applies anytime after the lock-in period

How to Calculate Loan Foreclosure Charges? 

You can calculate charges in two ways:

• Manual calculation: Outstanding loan amount × applicable foreclosure rate + GST. For example, if you owe ₹1,00,000 and the fee is 4%, then the charge = ₹4,000 + GST. 
• Using a foreclosure charge calculator: Many lenders offer online foreclosure charge calculators. You can enter your outstanding balance and tenure to see the exact amount payable.

Process of Personal Loan Foreclosure

You can follow these simple steps to foreclose your personal loan:

Step 1: Contact the lender or log into your loan account

Step 2: Request a foreclosure statement showing dues and fees

Step 3: Pay the outstanding amount plus foreclosure charges

Step 4: Get a foreclosure acknowledgement and No Objection Certificate (NOC) from the lender

Step 5: Ensure your credit report reflects loan closure

Factors to Consider Before Foreclosing Your Loan 

Before you decide to close your loan early, keep these points in mind. They will help you make a smarter financial decision.

• Check your lender’s policy: Some lenders allow foreclosure only after a lock-in period
• Review your EMI history: A clean repayment record may help you get lower foreclosure fees
• Compare your interest savings: Foreclose only if the interest you save is higher than the foreclosure charges you will pay
• Keep emergency funds intact: Make sure you do not use all your savings or your bonus for foreclosure
• Check for offers or fee waivers: Some lenders remove charges after a certain number of EMIs or during festive periods
• Confirm if part-prepayment is allowed: At times, part-prepayment can reduce EMIs or tenure without full foreclosure

Foreclosure Makes Sense: 

• When you have extra funds and want to reduce interest
• When your loan has a long tenure left
• When your loan interest rate is high
• When you want to improve your credit score by reducing debt

Avoid Foreclosure:

• When the foreclosure charges are high
• When your loan is nearing completion
• When closing the loan will affect your savings or emergency fund
• When you plan to take another loan soon and want liquidity

Foreclosure can help you save interest, but charges vary across lenders. Always check the personal loan foreclosure charges before making a decision. Compare savings, charges and timing to ensure you benefit from closing the loan early.

And if you want a loan without foreclosure charges within a few minutes, try the Fibe Instant Cash Loan. Just download the Fibe Personal Loan App and get funds of up to ₹5 lakhs with minimal documentation!

FAQs on Foreclosure Charges for a Personal Loan

How can I avoid foreclosure charges? 

You can choose lenders with zero foreclosure fees, pay EMIs on time and look for offers where lenders waive charges after a fixed number of EMIs.

Which bank has zero foreclosure charges? 

Some lenders offer zero foreclosure charges on floating-rate loans and a few NBFCs waive fees after a set number of EMIs. Fibe also offers personal loans with no foreclosure charges, giving you more control if you plan to close your loan early.

Is it good to foreclose a personal loan? 

It depends. Yes, if the interest you save is more than the foreclosure charges. Avoid it if the fees are high or if it affects your emergency fund.