Paying off your loan before its full tenure seems like a smart financial move, right?
It can reduce your interest outgo and relieve debt pressure.
But wait — you might face a pre-closure charge.
Let’s break down what it is, why lenders charge it, and how Vizzve Finance helps you minimize or avoid it.
What Is Pre-Closure?
Loan Pre-Closure means repaying your entire outstanding loan amount before the agreed tenure ends — either in part or full.
When you do this, some banks or NBFCs charge a fee — called the pre-closure charge or foreclosure fee.
Why Do Lenders Charge It?
Lenders earn most of their profit from the interest over time.
When you close a loan early, they lose future interest income.
To make up for this, they impose a percentage-based penalty.
Typical Pre-Closure Charges in India (2025)
| Loan Type | Pre-Closure Charges (Approx.) |
|---|---|
| Personal Loan | 2% – 5% of outstanding amount |
| Home Loan | Usually Nil (for floating rates) |
| Car Loan | 2% – 6% depending on lender |
| Business Loan | 2% – 4% if closed before lock-in |
💡 Note: RBI has banned prepayment penalties on floating-rate home loans. Fixed-rate loans can still carry charges.
When Can You Pre-Close?
Most lenders allow full repayment only after a lock-in period of 6–12 months.
Check your loan agreement before planning a pre-closure.
Benefits of Pre-Closure
✅ Saves on long-term interest
✅ Improves credit score by clearing debt
✅ Reduces monthly financial burden
✅ Gives peace of mind
📉 Example: A ₹5 lakh personal loan at 12% for 5 years can save up to ₹40,000 in interest if pre-closed in year 3.
Things to Watch Before Pre-Closing
🔍 Check if pre-closure is allowed
📄 Know the exact penalty amount
🧾 Collect a No Dues Certificate (NDC)
✅ Ensure all EMIs till date are cleared
📊 Evaluate if the savings outweigh charges
Vizzve Smart Move
At Vizzve Finance, we:
Clearly show pre-closure terms before you apply
Help negotiate zero or lower charges for eligible customers
Offer instant repayment summaries
Assist in generating your NOC digitally
❓FAQs
Q1: Is pre-closure good or bad?
Good — if you save more on interest than what you pay as a charge.
Q2: Can I pre-close a loan anytime?
Only after the lock-in period. Check with your lender.
Q3: Does pre-closure impact credit score?
Yes — positively, as it lowers outstanding debt.
Published on : 22nd July
Published by : SMITA
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