India
Personal Loan Foreclosure Charges in India: RBI Rules and When to Repay Early
Clearing a loan early is usually right. What it costs depends on the rate type and the lender schedule.
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- Floating rate loans
- No foreclosure charge for individuals
- Fixed rate loans
- Charge permitted, per schedule
- Typical charge
- 2%-4% of outstanding
- GST
- Applies to the charge
Floating rate loans are free to close
For individual borrowers on floating rates, RBI bars foreclosure penalties. That is a strong argument for floating over fixed if early repayment is likely.
Fixed rate loans can charge
Penalties of 2%-4% of the outstanding balance are common and permitted. On 3 lakh that is 6,000-12,000 rupees, which can erase the saving.
Do the arithmetic before closing
Compare the penalty plus GST against the interest remaining. Short remaining tenors often make foreclosure a loss.
Ask for the statement in writing
Get the outstanding and the exact charge in writing before paying. Verbal figures are frequently wrong.
FAQ
Is foreclosure free on floating loans?▾
For individuals, yes.
What does it cost on fixed loans?▾
Typically 2%-4% of outstanding plus GST.
Should I always close early?▾
No - compare the charge to the remaining interest.
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