- Foreclosure repays the whole outstanding loan; part-prepayment repays a portion.
- Charges depend on the loan type and rate type: check your sanction letter.
- After closure, collect the no-dues letter and original documents, and check that your credit report shows “closed”.
The difference
- Part-prepayment: you pay a lump sum on top of your EMI. The outstanding principal falls, and you choose to cut the EMI or the tenure. See which one saves more.
- Foreclosure: you pay the full outstanding amount and close the loan before the end of the tenure.
Charges
RBI rules generally bar prepayment or foreclosure charges on floating-rate loans to individual borrowers (not taken for business). Fixed-rate loans, personal loans and business loans may carry a charge, often a percentage of the amount prepaid. Always read the clause and ask for a written foreclosure statement. If you are thinking of replacing the loan, run the numbers with the balance transfer calculator.
Steps to foreclose
- Request a foreclosure statement with the exact amount and validity date.
- Pay by the specified method and date, so that interest does not accrue further.
- Collect a no-dues certificate and a loan closure letter.
- For secured loans, collect all original property or vehicle papers. RBI rules require lenders to return them promptly, generally within 30 days, with compensation for delay. Check the current norms.
- Get the lien or charge removed (for property, ask for the charge satisfaction filing).
Afterwards
Check your credit report a month later to make sure the account shows closed with a zero balance. If it does not, see how to fix report errors.
This article is for general information only and is not financial, legal or tax advice. Interest rates, fees and rules change, so confirm current terms with the lender or the regulator before you decide. Examples use illustrative figures. Last reviewed: October 2026.