Personal loan foreclosure and prepayment charges

Paying off a personal loan early saves interest, but a lender may charge a fee for it. Here is what the rules say, where to find your lender’s charge, and a calculator to see whether closing early is worth it.

Foreclosure, part-prepayment: what they mean

  • Foreclosure — paying the whole outstanding amount and closing the loan before its last EMI.
  • Part-prepayment — paying a lump sum towards the principal while the loan continues; the lender then lowers either your EMI or the number of EMIs left.
  • Foreclosure / prepayment charge — a fee, usually a percentage of the amount you prepay or of the outstanding principal, plus GST.

What RBI’s rules say

  • Banks and NBFCs cannot charge you for prepaying or foreclosing a floating-rate loan taken as an individual for personal (non-business) purposes. RBI has barred this since 2014, and its pre-payment charges directions restate it for loans sanctioned or renewed from 1 January 2026.
  • Most personal loans are fixed-rate. On those, a lender may charge for prepayment — but the charge must be disclosed in the Key Fact Statement and the loan agreement before you accept.
  • Digital loans have a cooling-off (look-up) period, stated in the KFS, during which you can exit by repaying the principal and the interest and charges for the days you had the money, without a penalty.

Your lender’s own KFS is the reference for your loan: check its prepayment and foreclosure lines before you sign.

Is closing early worth it? A calculator

Outstanding principal after 12 EMIs: ₹1,44,829

Interest you would no longer pay: ₹28,702

Foreclosure charge with 18% GST: ₹5,127

Closing early saves about ₹23,575 after the charge.

Example figures — enter your own from your KFS. Reducing-balance EMIs; ignores any other charges. An illustration, not advice.

Before you prepay

  • Ask the lender for a foreclosure statement: the exact amount to close, valid on a given date.
  • Prepaying early in the tenure saves the most interest; near the end, most of what is left is principal.
  • After closing, get a no-dues certificate and check that your credit report shows the loan as closed.

How interest, fees and APR fit together: APR and the Key Fact Statement.

Applications are made in the Innopay app: choose the amount you need there and see the offers available to you. The lender decides approval.

Apply in the Innopay app

Frequently asked questions

Can I close my personal loan early?

Yes. Ask the lender for a foreclosure statement with the exact amount to close the loan. A fixed-rate loan may carry a foreclosure charge, which must be shown in your Key Fact Statement and loan agreement.

Is there a foreclosure charge on a floating-rate personal loan?

Under RBI's pre-payment charges directions, regulated lenders cannot charge for prepaying a floating-rate loan taken by an individual for non-business purposes, for loans sanctioned or renewed from 1 January 2026.