How is a Foreclosure on a Personal Loan Calculated?

Personal loans are common in India, especially as they are quick to avail, flexible in terms of amount, interest rate, tenure, and require no collateral. The current technology has made taking a loan a few steps process for the borrower leading to expansion of the loan market in India. Personal loans are certainly a go-to option for many borrowers, from higher education, buying a new car, house renovation, sudden requirements of finance, such as in medical emergencies, to even clearing off outstanding dues.

However, if one has sufficient finances to repay the remaining amount of the loan in a single payment, one can decide to end the EMIs by paying the amount and living a debt-free life. This is known as loan foreclosure.

How much will one have to pay as the remaining amount, will there be any penalty or interest, and how is it calculated. Let’s read further to find out.

How is a Foreclosure on a Personal Loan Calculated?

As lenders give various options and flexibility in terms of personal loan interest rates to borrowers while taking a loan, in case of a foreclosure, they usually have a fixed charge according to their policy.

The charges can be on both, partial or full prepayment of the remaining personal loan amount. While they can be levied on different kinds of loans, such as regular, loan top-ups, flexible funding, i.e., cash and overdraft options, the charges vary according to the loan. The GST is also charged while calculating the foreclosure charges. The foreclosure can be done online and in walk-in format, and charges may be nil or applied accordingly. Usually, there is a lock-in period till which part payment is not allowed.

A personal loan foreclosure calculator can be used to calculate the foreclosure amount. It requires the borrower to enter the loan amount, the total loan tenor, the interest rate at which the loan was taken, the percentage of foreclosure charges, and the number of months you would like to foreclose the loan before the last payment, i.e. the months of foreclosure. This gives us the foreclosure amount, the total payment, plus interest and outstanding principal at the time of foreclosure.

Impact on credit score

Foreclosure of an ongoing loan does not hamper the credit score. In fact, it might boost the credit score, which will help take the next loan easily if required. It is better to foreclose the loan if one can for this benefit as well.


Two things are crucial when it comes to foreclosure. The first thing is to understand the clause of foreclosure charges when one decides to take a personal loan in case of a change of financial situation in the future. The second is to be aware while calculating the foreclosure charges to understand how they benefit the loan taker.

Another essential thing to consider is the credibility and reputation of the lender and the services they provide. This helps the borrower have a clear picture and fine print of the loan when they first borrow it from the lender.

India’s trusted lending institution Tata Capital provides hassle-free personal loans and excellent foreclosure services on the loans, with their standard foreclosure charges being 4.5% of the principal outstanding + GST.

Now that you know about personal loans and their foreclosure, you can look forward to a seamless loan experience with Tata Capital.