Personal loans are one of the most easily accessible options in a financial emergency we face in a day to day life. Personal loan is available in any part of the country as easily as a personal loan in Delhi. When you get a personal loan, you can repay it in monthly instalments over an agreed tenure. However, if you wish to make full repayment of your remaining personal loan in one single payment before the defined time, it is called personal loan foreclosure or prepayment. While some lenders charge a prepayment fee, others don’t.
What is a personal loan foreclosure fee?
When you prepay a loan ahead of the scheduled tenure, some lenders require you to pay some per cent of your outstanding balance, known as a foreclosure charge. Personal loan foreclosure charges vary from lender to lender and tenure to tenure. Some lenders set a lock-in period of, say 6 months or 1 year, in the meantime, any kind prepayment can attract penalties, whereas some lenders allow part-prepayment without any charges. However, if allowed after the lock-in period, you can close the loan in one single payment.
Hence, when is the right time to prepay a personal loan depends on the lender’s policy, you got a loan from. Here is a list of foreclosure penalties charged by top lenders on a personal loan in India.
| Lender | Foreclosure charges | Prepayment period |
| State Bank of India | 3% on prepaid amountIf loan account is being closed with the proceeds received from a new loan under the same scheme, no foreclosure fee is charged | Terms and conditions apply |
| ICICI Bank | 5% on principal outstanding + GST | Any time during the loan tenure |
| HDFC Bank | Foreclosure charges are as underLoan closed between 13 – 24 months – 4% of principal outstandingLoan closed between 25 – 36 months – 3% of principal outstandingLoan closed after 36 months – 2% of principal outstanding | No part or full prepayment is allowed before the repayment of 12 EMIs |
| Axis Bank | There is no prepayment charge on an Axis Bank personal loan | Foreclosure is possible only after all outstanding dues are cleared |
| Yes Bank | Charges on Yes Bank personal loans are as under:Loan closed between 13 – 24 months – 4% of principal outstandingLoan closed between 25 – 36 months – 3% of principal outstandingLoan closed between 37 – 48 months – 2% of principal outstandingAfter 48 months – NA | Foreclosure of a personal loan is allowed after repayment of 12 EMIs |
| Citibank | Up to 4% of the outstanding balance | As per loan disbursal policy |
| IndusInd Bank | 4% of the principal outstanding | Salaried individuals can foreclose the loan after the payment of 12 EMIsSelf-employed individual can foreclose the loan after the payment of 6 EMIs |
| Kotak Mahindra Bank | 5% + GST on principal outstanding | Foreclosure will be allowed after 12 months from the date of your first EMI1 month foreclosure request is compulsory |
| HSBC Bank | Up to 3.75% of the principal outstanding or T&C in your agreement letter | Foreclosure will be allowed post 12 months of loan the disbursement |
| IDBI Bank | Foreclosure after 6 months of disbursal may not incur any charges2% of the outstanding principal on a foreclosure before 6 months of disbursal | Foreclosure is allowed after 6 months of the loan disbursement Before 6 months foreclosure charges are applicable |
| Punjab National Bank | No prepayment charges | As per the terms and conditions in your personal loan agreement |
| Corporation Bank | No prepayment charges | As per the terms and conditions in your personal loan agreement |
| Central Bank | Depends on the type of loan borrowed | As per the terms and conditions in your personal loan agreement |
| South Indian Bank | 4% of the outstanding principal on loan foreclosed within 1 year of disbursement After 1 years – 2% of the outstanding principal | As per the terms and conditions you have negotiated with the bank |
| Andhra Bank | No foreclosure charges | AS per the terms and conditions in your personal loan agreement |
| Oriental Bank of Commerce | No foreclosure charges | AS per the terms and conditions in your personal loan agreement |
| Tata Capital | 4.5% of the principal outstanding + GST | Foreclosure allowed only after six months of disbursal |
| Dhanlaxmi Bank | 2% of the principal outstanding + GST | As per the terms and conditions in your loan agreement |
| Bajaj Finserv | 4% of the principal + applicable taxes | After 1 month from the date of the loan disbursal |
| IIFL | 6% of the principal outstanding | After six months of the loan disbursement |
| Fullerton India | Foreclosure charges are as under:Loan closed between 7 – 17 months – 7% of principal outstanding Loan closed between 18 – 23 months – 5% of principal outstandingLoan closed between 24 – 35 months – 3% of principal outstandingLoan closed after 35 months – Nil | Foreclosure is not allowed before 6 months from the loan agreement date |
Benefits of personal loan foreclosure
Foreclosure is done to reduce the cost of credit. For example, if you have availed a personal loan of Rs. 2 lakh at 15% interest rate for 5 years, your monthly EMI would be Rs. 4758. You would need to pay total interest of Rs. 85,479. You would have paid Rs. 29,039 towards premium and Rs. 28,057 as interest by the end of the year. If you foreclose the loan now, you can save Rs. 57, 422 in the form of the interest rate.
Now personal loans are easily available, you can get a personal loan in Delhi, a metro city, or in any remote area of the country. If you close your personal loan ahead of the tenure, you can save a lot. If you get a personal loan from State Bank of India by foreclosing your personal loan, you won’t have to pay SBI interest rate on the outstanding principal. However, SBI personal loan has prepayment charges. You must calculate how much you can save on SBI interest rate after foreclosure charges by making a prepayment. If you think you can foreclosure on a personal loan earlier to tenure, apply with a lender that does not charge a prepayment fee.