By continuing, you agree to LoansJagat's Credit Report Terms of Use, Terms and Conditions, Privacy Policy, and authorize contact via Call, SMS, Email, or WhatsApp
Disclaimer: The information published on LoansJagat is intended for general informational and educational purposes only and should not be considered financial, legal, or investment advice. Interest rates, loan terms, statistics, and other data may change over time and may vary by lender or source. Please verify the latest information and consult a qualified financial advisor or the respective Bank/NBFC before making any financial decisions.
Subscribe Now
About the author
‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
Related Blog Post
Simplify All Your Loans Into One Affordable EMI
Customers Served
Debt Consolidated
1200+ Reviews
Locations in India
Club all Loans & Credit Card Bills into Single EMI
Quick Apply Loan
Consolidate your debts into one easy EMI.
Takes less than 2 minutes. No paperwork.
10 Lakhs+
Trusted Customers
2000 Cr+
Loans Disbursed
4.7/5
Google Reviews
50+
Banks & NBFCs Offers
Other services mentioned in this article
Key Highlights
A personal loan is a type of unsecured loan offered by banks, NBFCs (Non-Banking Financial Companies), or digital lenders..
Anita took a personal loan of ₹5,00,000 in April 2023 from a reputed bank at an interest rate of 13% per annum for a tenure of 4 years (48 months). Her EMI was ₹13,410. After paying EMIs for 18 months, she received an inheritance and decided to foreclose the loan in October 2024.
Breakdown of her payments and foreclosure details:
By foreclosing early, Anita reduced her interest burden significantly, even after paying a 3% foreclosure charge. She gained financial freedom nearly 2.5 years ahead of schedule.
When you foreclose a personal loan early, you repay the entire remaining amount before the loan term ends. This usually means:
However, some lenders may charge a foreclosure fee (typically 2-6% of the outstanding amount). Also, if your loan has tax benefits, you might lose some deductions (though this rarely applies to personal loans).
Do you know that lenders cannot charge foreclosure or pre-payment fees on floating-rate personal loans or small business loans? This advisory was introduced by the RBI and is effective for loans sanctioned or renewed from January 1, 2026.
At the end of the day, it's their personal finances that people are concerned about. When they find a way they save money, they will go with it. Also, foreclosing on a personal loan early relieves you from years of stress and increases your credit score.
Foreclosing a personal loan early involves a few simple but important steps: contacting your lender, checking your outstanding balance, and settling the total due, including any foreclosure charges. Let’s understand this through an example:
Aarav took a personal loan of ₹6,00,000 in March 2023 from his bank at an interest rate of 13% per annum for 4 years (48 months). His monthly EMI was ₹16,046. By June 2024, after paying for 15 months, he received a lump sum from a freelance project and decided to foreclose the loan.
48 months
*T&C Apply
This process saved him over ₹1,00,000 in future interest and gave him complete peace of mind.
While both prepayment and foreclosure involve repaying your loan earlier than scheduled, they differ in purpose, amount, and impact. Let’s understand this through Priya’s example and a simple table.
Priya took a personal loan of ₹5,00,000 in January 2023 for 36 months at 12% interest. Her EMI was ₹16,607.
So, prepayment is paying just a portion of the loan, while foreclosing means paying the entire amount at once. The table given below differentiates between the two in detail.
In both cases, you have to pay a small fee. If you foreclose a personal account early, you are relieved from the interest at once, so in this case, the fee does not hurt much. However, in prepayment, you pay a fee as well as the interest for the remaining time period.
Foreclosing a personal loan early can be a wise financial decision, helping you save on interest and become debt-free faster. However, it’s important to consider any foreclosure charges and your overall financial situation before proceeding. Always review the terms with your lender to ensure early repayment truly benefits you.
Do all banks charge a foreclosure fee if I close my loan early?
No. Some loans, like floating rate loans, do not have foreclosure charges as per RBI rules. Always check your loan agreement.
If my loan has a floating rate of interest, can the bank still charge foreclosure fees?
RBI rules say banks cannot charge foreclosure fees on many floating-rate personal loans. Confirm this with your bank.
Can I negotiate foreclosure charges with my bank?
Yes. If you have a good repayment history, you can request that the bank reduce or waive these charges.
Do I lose tax benefits if I close my personal loan early?
Personal loans usually do not have tax benefits like home loans. So there is no major tax impact. What Happens If You Foreclose a…
Does closing a loan early affect my credit score
In most cases, it improves your score as your debt reduces. Sometimes the score may dip slightly for a short time, but it recovers.
Can I convert my loan to EMI after making a prepayment?
Many banks allow you to choose between reducing your EMI and reducing your loan tenure. Reducing the tenure saves you more interest overall.
What should I do if there is a mistake in my foreclosure statement?
Contact your bank immediately and raise a complaint. Provide transaction proof and ask for a corrected statement.
