Personal Loan

What are Personal Loan Foreclosure Charges? When Do You Pay Them?

06 Dec 2019 5 min read
Personal Loan: Know More About Personal Loan Foreclosure Charges - Afinoz

A personal loan is one of the best options for individuals to overcome financial emergencies they experience in buying a house, car, and big-ticket items; and paying miscellaneous bills like that of credit cards and education fees.  

When you get a personal loan, you have to repay it in monthly instalments, generally known as EMI, over a period specified by a lender. However, if you make the full repayment of your remaining personal loan in one single payment ahead of the tenure, it is called personal loan foreclosure or prepayment. 

What are personal loan foreclosure charges?

When you prepay a loan, such as a personal loan or home loan, before the scheduled tenure, some banks or financial institutions charge you some percent of your outstanding balance, known as a foreclosure charge. Foreclosure charges on a personal loan may vary from lender to lender and tenure to tenure. Some lenders set a lock-in period of, say 12 EMIs or one year, during which foreclosing a personal loan will incur penalties. However, after the lock-in period, the borrower can close the loan in one single payment.

Foreclosure charges on personal loans by leading lenders in India

Here is a list of foreclosure penalties charged by top lenders on a personal loan

Lenders

Foreclosure charges

Prepayment period

State Bank of India

  • Prepayment charges of 3% on prepaid amount

  • No foreclosure charges are applicable if loan account is being closed with the proceeds received from a new loan under the same scheme

Terms and conditions apply

ICICI Bank

              5% on principal outstanding + GST

Any time during the loan tenure

HDFC Bank

Prepayment charges on HDFC Bank personal loan foreclosure are as under:

  • Loan closed between 13 - 24 months - 4% of principal outstanding

  • Loan closed between 25 - 36 months - 3% of principal outstanding

  • Loan closed after 36 months - 2% of principal outstanding

No part or full prepayment is allowed before the repayment of 12 EMIs

Axis Bank

No foreclosure charges are applicable on an Axis Bank personal loan

Foreclosure is possible only after all outstanding dues are cleared 

Yes Bank

Yes Bank’s foreclosure charges on a personal loan are as under:

  • Loan closed between 13 – 24 months - 4% of principal outstanding

  • Loan closed between 25 – 36 months - 3% of principal outstanding

  • Loan closed between 37 – 48 months – 2% of principal outstanding

  • After 48 months - Nil    

Foreclosure of a personal loan is allowed after repayment of 12 EMIs

Citibank 

Up to 4% of the outstanding balance 

After payment of 12 EMIs, for loans disbursed after 1 October 2015

After 6 months of disbursal of a loan amount, for loans disbursed before 1 October 2015

 

IndusInd Bank

For salaried individuals: 4% of the principal outstanding

For self-employed individuals: 4% of the principal outstanding

A salaried individual can foreclose the loan after the payment of 12 EMIs.

A self-employed individual can foreclose the loan after the payment of 6 EMIs.

Kotak Mahindra Bank

Foreclosure charges applicable are 5% + GST on principal outstanding 

Foreclosure is possible only after 12 months from the date of your first EMI.

1 month foreclosure intimation period is compulsory.

HSBC Bank

Up to 3.75% of the principal outstanding or as per the terms and conditions in your personal loan agreement

Foreclosure is possible post 12 months of loan the disbursement

IDBI Bank

Foreclosure of a personal loan after 6 months of disbursal may not incur any charges

Foreclosure of a personal loan before 6 months of disbursal will attract a charge of 2% of the outstanding principal  

Foreclosure is possible after 6 months of the loan disbursement. 

Before 6 months it will incur foreclosure charges

Punjab National Bank

No fee will be applicable on prepayment of the loan

As per the terms and conditions in your personal loan agreement

Corporation Bank

No fee will be applicable on prepayment of the loan

As per the terms and conditions in your personal loan agreement

Central Bank

Prepayment charges applicable will depend on the type of personal loan being borrowed

As per the terms and conditions in your personal loan agreement

South Indian Bank

Loan being foreclosed within 1 year of disbursement – 4% of the outstanding principal

Loan being foreclosed after 1 year of disbursement – 2% of the outstanding principal

As per the terms and conditions you have negotiated with the bank

Andhra Bank

No foreclosure charges will be levied on the personal loan

AS per the terms and conditions in your personal loan agreement

Oriental Bank of Commerce

No prepayment charge on foreclosure of the loan

AS per the terms and conditions in your personal loan agreement

Tata Capital

A charge of 4.5% of the principal outstanding + GST will be applicable

Foreclosure is possible only after six months of disbursal

Dhanlaxmi Bank

A charge of 2% of the principal outstanding + Service Tax will be applicable

As per the terms and conditions in your loan agreement 

Bajaj Finserv

4% + applicable taxes on principal outstanding

After 1 month from the date of the loan disbursal

IIFL

A charge of 6% of the principal outstanding will be applicable 

After six months of the loan disbursement 

Fullerton India

Foreclosure charges on a personal loan from Fullerton India are as under:

  • Loan closed between 7 – 17 months – 7% of principal outstanding 

  • Loan closed between 18 – 23 months – 5% of principal outstanding

  • Loan closed between 24 – 35 months – 3% of principal outstanding

  • Loan closed after 35 months – Nil

Foreclosure is not allowed before 6 months from the loan agreement date

What are the benefits of personal loan foreclosure?

Pre-closure is done to reduce the cost of credit. If you make the full prepayment towards your personal loan in one single payment, you save a lot on the interest. 

Let’s take an example – 

Personal Loan = Rs. 2 lakh

Interest Rate = 15%

Tenure = 5 years

EMI = Rs. 4758

Total interest rate payable over the entire loan tenure would be Rs. 85,479. 

By the end of the first years, you would have paid Rs. 29,039 towards premium and Rs. 28,057 as interest. If you decide to foreclose the loan now, you can save Rs. 57, 422 in the form of the interest rate.

But it is possible only if the lender does not charge a prepayment penalty. If you think you can foreclose a personal loan, you should apply personal loan with a lender that doesn’t charge prepayment penalties. Like personal loan, there are foreclosure charges on home loans and auto loans also. 

Here you can readpersonal loan balance transfer to save on your EMI