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What is the Procedure for Education Loan Foreclosure?

Highlights

  • Can I Close my Education Loan? Yes, you can!
  • Read this post to know how you can do so and save on interest payments

Students borrow an education loan for their educational needs such as admission for overseas universities or to pursue their graduate and diploma courses. As the loan can be given for a maximum of 15 years, many won’t like to be under debt for that long. So, you will look to close your loan account before it runs its original span. You can save from your daily routine to ensure you do close the loan before and save on your interest outgo. The bank may levy a prepayment fee too. But the question is, how can you plan your education loan foreclosure? Well, this is what this article is for. Read this and plan your foreclosure.

Use the Education Loan EMI Calculator to Decide on Your Foreclosure Amount

It would be easy for you to make prepayments if you check the balance amount and calculate the savings. See the example below to know how the foreclosure is better for your loan payments.

For Example, Neeta borrowed INR 23,00,000 from the bank to finance her higher studies at an interest rate of 10.55% per annum. She chose a tenure of 10 years. After getting a job, she started the loan payment, but after 6 years of its payment, it became difficult for her to manage the savings. So, Neeta decided to foreclose the loan. Look at the table below to know how much she saved after the loan closure.

Foreclosure Procedure

  • Visit the bank branch and talk to your bank representative
  • Fill up the loan closure request form
  • Wait for the bank confirmation
  • Check the loan balance amount
  • Pay the outstanding balance via cheque, ECS or any other method
  • Get the NOC from your bank and close your account

Tax Benefits After Education Loan Foreclosure

There won’t be any tax benefits after you foreclose the education loan. However, the tax benefits apply for only 8 years since the time the loan repayment begins. So, if you have taken a loan for say 15 years, you can save tax for 8 years and save interest obligations for the remaining 7 years by doing a foreclosure.

Foreclosure Fee of Education Loans

Check the table below to know the foreclosure fee levied by different lenders.

BankForeclosure Fee
Kotak Mahindra Bank5% of the Principal Outstanding
Bank of BarodaNIL
State Bank of India (SBI)NIL
Punjab National Bank (PNB)NIL
HDFC Bank4% of the Principal Outstanding
RBL BankNIL
Union Bank of IndiaNIL

Things to remember for education loan foreclosure

  • Check Your loan balance
  • The interest you paid for the loan
  • The prepayment penalty if the bank charges from the student
  • Calculate your savings
  • Take lump sum amount ready for the loan closure
  • Choose the payment option which is suitable for you
  • Confirm the closure with the bank once it was paid and take the NOC and pledged collateral papers.

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