Planning to repay your personal loan before the end of its tenure? Foreclosure can help you save on future interest, but the lender may charge a fee for closing the loan early. Understanding these personal loan foreclosure charges can help you determine whether early repayment is financially beneficial.
This guide covers foreclosure charges, how they are calculated, applicable conditions, the foreclosure process, and their potential impact on your finances and credit profile.
What Are Foreclosure Charges on a Personal Loan?
Foreclosure charges on personal loans are the fees that the lenders charge you as a borrower when you repay the loan amount along with the interest well within the stipulated repayment period. This would be the ideal option for you when you receive a lump sum, as it allows you to reduce the EMI and the overall cost of the loan. In India, most lenders charge foreclosure fees ranging from 2% to 6% of the outstanding amount, depending on the lender’s policy and the loan's interest rate.
Many Banks, financial institutions, and NBFCs offer a range of options for loan foreclosure. This includes the ability to foreclose the loan.
- Only after the completion of a certain number of EMI.
- Only after you have repaid a considerable portion of the EMI.
- Only twice the duration of the loan.
- Only once in a financial year.
Why Do Lenders Charge Foreclosure Fees?
When you close a personal loan before its scheduled tenure, the lender may lose part of the interest income it expected over the remaining repayment period. A foreclosure charge, where applicable, helps the lender account for the early closure and related administrative costs. The actual charge and conditions depend on the lender and the terms of your loan agreement.
RBI Guidelines on Personal Loan Foreclosure
Under the new RBI regulations, lenders are strictly prohibited from charging pre-payment penalties or foreclosure charges on the floating-rate personal loans taken by individuals. For fixed-rate loans or loans not covered by the waiver, lenders will levy foreclosure charges ranging from 2% to 6%. The foreclosure charges on your personal loans should be made explicit in the loan agreement.
Key Guidelines to Know
- Floating-rate loans: Eligible floating-rate term loans to individual borrowers for non-business purposes cannot be subject to foreclosure or prepayment penalties by applicable regulated lenders.
- Loan terms and charges: Check the sanction letter, Key Facts Statement (KFS), and loan agreement for applicable charges and conditions. RBI requires relevant charges to be disclosed transparently where applicable.
- Fixed-rate loans: The treatment of foreclosure charges can differ from floating-rate loans. Check your lender's current terms and the applicable regulatory requirements before making an early repayment.
- Before foreclosure: Ask the lender for a foreclosure statement showing the outstanding amount, applicable charges and the total amount required to close the loan.
Personal Loan Foreclosure Charges of Major Banks (2026)
The following table clearly lists the foreclosure charges offered by major banks. They are:
Name of the Bank | Foreclosure Charges |
| SBI | 2% on the prepaid amount |
| HDFC Bank | Up to 24 EMIs: 4% of the outstanding principal 25 - 36 EMIs: 3% of the outstanding principal Beyond 36 EMIs: 2% of the outstanding principal |
| ICICI Bank | After the 1st EMI: 3% of the outstanding principal After 12 EMIs: No foreclosure charges |
| Axis Bank | Up to 36 months: 3% of the outstanding principal After 36 months: 2% of the outstanding principal |
| Kotak Mahindra Bank | Within 3 years: 4% of the outstanding principal + applicable taxes After 3 years: 2% of the outstanding principal + applicable taxes |
| Bank of Baroda | Floating-rate loans: No foreclosure charges Fixed-rate loans: 2% - 4% of the outstanding principal |
| Punjab National Bank | 0% Foreclosure Charges for most of the personal loans |
| IndusInd Bank | Foreclosure Not Allowed Till 12 EMIs Up to 4% of the Outstanding Principal Amount |
| Yes Bank | Foreclosure Not Allowed Till 12 EMIs 13 to 24 Months – 4% of the Principal Outstanidng 25 to 36 Months – 3% of the Principal Outstanidng 37 to 48 Months – 2% of the Principal Outstanding Above 48 Months - Nil |
| Union Bank of India | 2% to 4% of the Principal Outstanding |
| IDBI Bank | Within 12 months: 5% of the amount paid 12–24 months: 3% of the amount paid After 24 months: No foreclosure charges |
| IDFC FIRST Bank | Nil (sanction letter required for foreclosure) |
| Bandhan Bank | Within 12 months: 4% of principal outstanding After 12 months: 2.5% of principal outstanding ₹10 lakh+ loans: Nil after 12 EMIs with own funds Staff loans below ₹10 lakh: 1% for eligible staff; otherwise, standard charges apply |
| DBS Bank | Foreclosure after 6 months; charges apply on outstanding principal + GST. 7–24 months: 4.50% 25–36 months: 2.50% Above 36 months: 2.00% |
| RBL Bank | Up to 18 EMIs: 5% of outstanding principal After 18 EMIs: 3% of outstanding principal Nil charges: After 12 EMIs with no bounces, if paid from own funds. Balance transfers are excluded. |
Disclaimer: The features, application process, and all other information specified above, including rates, prices, and other critical information, are as of the date this page was created and are subject to change. Contact the relevant authority or visit their official website for accurate information.
Personal Loan Foreclosure Charges by NBFCs (2026)
The following table enlists the personal loan foreclosure charges that are offered by top NBFCs in India. They are:
NBFCs | Foreclosure Charges |
| Up to 4% of the outstanding principal | |
Bajaj Finance | Up to 4.72% of the outstanding principal, inclusive of applicable taxes. |
Prefr | Up to 5% of the outstanding principal |
| 0% Foreclosure Charges | |
AU Small Finance Bank | After 6 months: Foreclosure/prepayment is permitted. Before 12 months: 5% of the outstanding balance. After 12 months: 3% of the outstanding balance. |
Ujjivan Small Finance Bank | Up to 6 Months - Foreclosure Not Allowed Post 6 Months - 4% of the Principal Outstanding |
Utkarsh Small Finance Bank | 7-24 months: 4% of outstanding principal + applicable taxes 25-36 months: 3% of outstanding principal + applicable taxes Above 36 months: 2% of outstanding principal + applicable taxes |
Within 6 Months - 4% of the Outstanding Balance After 6 Months (Own Funds) – 0% Charges After 6 Months (Other Sources) - 4% of the Outstanding Balance | |
Aditya Birla Capital | First 12 Months - Lock-In Period. Foreclosure not allowed After 12 Months - 4% of the Outstanding Loan Amount |
| 2% to 4% of the loan amount | |
Moneyview | 0% of the loan amount |
Tata Capital | 12-month lock-in from the date of disbursement. 4.5% of the outstanding principal + applicable GST |
Hero Fincorp | Up to 5% of the outstanding principal + applicable GST. |
Mahindra Finance | Within 6 months: 4% of principal outstanding + applicable taxes After 6 months: No pre-closure charges |
Disclaimer: The features, application process, and all other information specified above, including rates, prices, and other critical information, are as of the date this page was created and are subject to change. Contact the relevant authority or visit their official website for accurate information.
How Are Foreclosure Charges Calculated?
Foreclosure charges are primarily levied by lenders to compensate for the interest they would otherwise earn if the loan were repaid in full. They also cover the administrative and operational costs associated with the personal loan.
Foreclosure Charges = Outstanding Principal Amount X Foreclosure Charges Percentage
For example, if the Outstanding Principal Amount is Rs. 5,00,000 and the Foreclosure charges of 4% is levied on the outstanding principal amount.
Foreclosure Charges = 5,00,000 X 4/100 = Rs. 20,000
Some lenders do charge a GST of 18%.
So, the Total Foreclosure Charges = Rs.20,000 X 18/100 + Rs.20,000
Total Foreclosure Charges = Rs. 3,600 + Rs. 20,000 = Rs.23,600
Personal Loan Foreclosure vs Part-Payment
Both options let you repay your personal loan before the scheduled tenure, but they work differently. Part-payment means paying a portion of the outstanding principal while continuing the loan. Foreclosure means paying the entire outstanding amount and closing the loan.
| Basis | Part-Payment | Foreclosure |
| Meaning | Pays off part of the outstanding principal | Settles the entire outstanding loan |
| Loan Status | Loan remains active | Loan account is closed |
| Outstanding Amount | Reduced partially | Fully settled |
| EMIs | May reduce or the tenure may shorten, based on lender terms | No further EMIs after closure |
| Charges | As per the lender's applicable terms | As per the lender's applicable terms |
| Interest Savings | Reduces interest payable over the remaining tenure | Can eliminate future interest on the closed loan, subject to applicable charges |
| Frequency | Subject to the lender's part-payment rules | Generally a one-time closure |
Tip: Before choosing either option, compare the potential interest savings with the applicable charges and consider your available funds.
Minimum Lock-in Period Before Foreclosure
Lock-in period is the time duration from the date of disbursement of the loan till the date by which you will not be allowed to foreclose the loan. Most lenders set a lock-in period between 6 months and 12 months from the date of loan disbursement.
The reason lenders set a lock-in period is to avoid losing interest on the personal loan, as well as the administrative and processing costs associated with it.
How to Foreclose Your Personal Loan – Step-by-Step
Before closing your loan early, compare the interest you may save with the applicable foreclosure charges. If foreclosure works in your favour, follow these steps:
Step 1: Check the Loan Terms
Review your loan agreement for foreclosure eligibility, lock-in conditions and applicable charges.
Step 2: Request a Foreclosure Statement
Contact your lender and ask for a statement showing the outstanding principal, applicable charges and the final amount payable.
Step 3: Verify the Payable Amount
Check the statement for any outstanding dues and confirm the calculation before making the payment.
Step 4: Submit the Foreclosure Request
Complete the lender’s required formalities and provide the requested documents.
Step 5: Pay the Closure Amount
Make the full payment through the payment method approved by the lender.
Step 6: Collect Closure Documents
Obtain the loan closure statement, NOC or other applicable confirmation from the lender.
Step 7: Check Your Credit Report
Once the lender updates the account, verify that the loan shows the appropriate closed status and no outstanding balance.
Step 8: Keep the Records
Save the payment receipt, closure statement and other related documents for future reference.
Should You Foreclose Your Personal Loan? Pros & Cons
Foreclosing a personal loan can reduce your future interest burden, but it may not always be the most cost-effective choice. Compare the remaining interest with foreclosure charges and consider your available savings before deciding.
When Does Foreclosure Make Financial Sense?
Foreclosure may be worth considering when:
- The interest saved is higher than the applicable foreclosure charges.
- You have sufficient funds left for your emergency and other financial needs.
- A significant portion of the loan tenure is still remaining, giving you more potential interest savings.
When May Foreclosure Not Be Worth It?
Keeping the loan may be more practical when:
- The remaining interest is lower than the foreclosure cost.
- Your loan is close to the end of its tenure.
- Using your savings for foreclosure would leave you with insufficient financial reserves.
- The applicable foreclosure terms make early closure relatively expensive.
Tip: Don't decide based on the foreclosure fee alone. Compare the total cost of closing the loan today with the cost of continuing the remaining EMIs.
How to Reduce or Avoid Foreclosure Charges
You may be able to reduce the cost of closing your personal loan by choosing the right repayment option and checking your lender's terms.
- Foreclose after the lock-in period: If your loan has a minimum lock-in period, check whether waiting until it ends reduces or eliminates the applicable charge.
- Consider part-payment: Paying a portion of the outstanding principal can reduce your future interest burden without closing the loan completely.
- Ask about fee concessions: You can check with your lender whether any waiver or concession is available based on your loan terms.
- Compare the costs: Calculate the interest you could save against the foreclosure charges and other applicable costs before closing the loan.
Documents Required for Personal Loan Foreclosure
The documents required may vary by lender. Typically, you may need:
- Loan Account Details: Your loan account number or latest loan statement.
- Identity Proof: A valid government-issued ID, if requested by the lender.
- Loan Documents: Relevant loan or sanction documents, as applicable.
- Foreclosure Request: A completed foreclosure/closure request form, if required.
Tip: Confirm the exact document requirements with your lender before initiating the foreclosure process.
Impact of Foreclosure on Credit Score
Foreclosing a personal loan does not automatically increase or decrease your credit score. Its effect can vary based on your repayment history, overall debt, credit mix and other accounts in your credit report.
- Account Closure: Once the lender reports the loan as closed, the account should reflect the updated status on your credit report.
- Repayment History: Consistently paying EMIs on time before foreclosure continues to reflect positively in your repayment history.
- Lower Outstanding Debt: Closing the loan removes the outstanding balance associated with that account, which may improve your overall debt position.
- Credit Mix: Closing an instalment loan can change your credit mix, so a temporary change in your score is possible for some borrowers.
Conclusion
Foreclosing a personal loan can help reduce your future interest burden, but it is not always the most cost-effective option. Before making a decision, compare the remaining interest with the applicable foreclosure charges and ensure that the payment does not strain your savings. Also, check your lender’s foreclosure terms and ask whether any applicable concession is available.
The right choice is the one that reduces your overall borrowing cost without compromising your financial stability.
Frequently Asked Questions
1. What are foreclosure charges on a personal loan?
Foreclosure charges on a personal loan are fees a lender may levy when you repay the entire outstanding loan before the scheduled tenure ends. The applicable charges depend on the lender, loan type, and terms stated in the loan agreement.
2. Can I foreclose my personal loan before the lock-in period?
It depends on the lender’s terms. Some lenders restrict foreclosure until a specified number of EMIs or months have been completed.
3. Is foreclosure better than part-payment?
It depends on your finances. Foreclosure closes the loan completely, while part-payment reduces the principal and keeps the loan active.
4. Does foreclosure reduce my interest burden?
Yes, early closure can reduce future interest, but the savings should be compared with applicable foreclosure charges.
5. Does personal loan foreclosure affect my credit score?
Foreclosure does not have a fixed impact on every borrower’s credit score. The effect can depend on factors such as repayment history, outstanding debt and credit mix.
Disclaimer: This page includes information compiled from many sources and is provided for informational purposes only. Given that this type of data may change over time, we cannot guarantee the accuracy of the information supplied or included within it. It is anticipated that the user will confirm with the relevant source before making any choices or taking any action.
