Personal Loan Foreclosure

Last Updated : June 24, 2025, 3:14 p.m.

Personal loans help individuals meet financial goals like home renovation or wedding planning. Sometimes, borrowers choose to repay the loan in full before the tenure ends—this is known as foreclosure. While it helps save on interest, banks often levy a one-time personal loan foreclosure charge for early closure. These charges differ from one lender to another, and borrowers are required to follow a specific foreclosure procedure.

It’s important to check your lender’s foreclosure terms, as some banks allow foreclosure only after a minimum number of EMIs have been paid. Reviewing the applicable charges in advance can help you plan better and avoid unexpected costs.

Foreclosure Fee on Personal Loan

In the table given below, you can see the Foreclosure fees of different banks.

All the charges will be for the outstanding amount of the loan. These charges apply if you choose to foreclose your personal loan. Make sure to review the required documents before initiating the foreclosure process.

Documents for Personal Loan Foreclosure

Here are the documents required to foreclose your personal loan -

• Personal loan account number : Available on your loan statement, online banking portal, or net banking account.
• Identity proof : A valid government-issued photo ID such as an Aadhaar card, PAN card, passport, or driver’s license.
• Loan-related documents : This includes the loan sanction letter, loan agreement, and loan account statement.

Once you’ve gathered the required documents, notify your lender about your intention to foreclose the loan. You’ll need to submit a foreclosure request and pay the outstanding loan balance to complete the process.

Process of Applying for a Personal Loan Foreclosure

• Review foreclosure terms : Go through your loan agreement to understand the foreclosure rules, including lock-in periods and applicable charges.
• Contact your bank : Inform your lender about your decision to foreclose the loan and request the exact outstanding amount.
• Calculate foreclosure charges : Confirm the total payable amount, including any one-time foreclosure charges and applicable taxes.

The bank representative will inform you of the outstanding loan amount and the applicable foreclosure charges. Based on this, you'll need to issue a cheque or a demand draft for the specified amount.

Once the payment is made, you'll receive an acknowledgment letter, and the official foreclosure agreement will be sent to you within a few days, completing the personal loan foreclosure process.

Documents You Will Receive After Personal Loan Foreclosure

After successfully foreclosing your loan, the lender will issue the following important documents:

• No Dues Certificate (NOC) : A formal document stating that you have cleared all outstanding dues and the loan is fully repaid.
• Loan Closure Statement : A detailed summary confirming the loan account has been closed, along with dates of disbursement and final payment.
• Final Payment Receipt : Proof of the last payment made to settle the outstanding balance.
• Updated Credit Report : Reflects the loan closure, which helps improve your credit profile and score.

Keep these documents safely, as they serve as official proof of loan closure and may be required for future financial transactions.

Benefits of Personal Loan Foreclosure

• Save on Interest Costs : Foreclosing your loan early reduces the total interest paid over the loan tenure.
• Boost to Credit Score : Successfully closing your loan ahead of schedule can enhance your creditworthiness.
• Achieve Financial Flexibility : Becoming debt-free sooner provides peace of mind and frees up your income for other goals.

Conclusion

Now that you know the process of personal loan foreclosure, it's important to understand that the main benefit is saving on interest payments. However, most banks have a minimum repayment period—typically between 6 months to 1 year—before allowing foreclosure. You must continue paying EMIs for this mandatory period, after which you can apply for foreclosure. While this helps reduce your overall interest burden and save extra money, keep in mind that banks may levy one-time Personal Loan Foreclosure Charges, which vary from lender to lender.