Personal Loan

Personal Loan Foreclosure with Zero Charges : Everything That You Need to Know


Personal loans can be used quickly to pay for expensive items or to get out of a bad financial situation. This makes personal loans the most popular type of retail loan. Because the interest rates on unsecured loans are high, the majority of borrowers repay the debt as soon as they can with additional funds. Even though it is in your best interest to pay off personal loans as quickly as possible, most of the time, doing so results in extra fees or penalties.

A personal loan can be paid off early through a process known as personal loan foreclosure. It entails making a single payment equal to the entire outstanding balance of the loan before the due date. Typically, a personal loan account has a lock-in period of one year, depending on your lender. After this period, you can pay off the remaining sum and close the account.

Types of Personal Loan Closure

1. Regular Closure: A personal loan is closed in a regular way when the borrower makes all the EMI payments on time, right up to the last one, and the lender gives them both a No Objection Certificate and a Loan Closure Certificate. So, the borrower makes the EMI payments throughout the chosen loan period.

2. Pre-Payment of a Personal Loan: A full or partial prepayment of personal loans is accepted. However, 0% to 5% of the loan balance can be charged as prepayment fees.

  • Preclosing a Personal Loan: A personal loan is pre-closed when the borrower pays off all of their debt before the end of the loan’s term. Depending on the terms of the loan, a pre-closing can be done between six months and a year after the loan is first taken out. Before the deal is closed, the borrower must pay the final loan amount as well as any pre-closing fees.
  • Personal Loan Partial Payment: Part-payment of a personal loan can be done to lower the EMI or to shorten the length of the loan. In your loan agreement, you will find the maximum amount that can be paid as part payment, as well as the terms and conditions for making part payment.

3. Personal Loan Foreclosure: Foreclosure is the term used for paying off a personal loan in full instead of making monthly payments. The foreclosure process can be initiated by either the lender or the customer. Most of the time, these are the legal steps that a lender takes to get back the lost sum on a loan that went into default.

What are Personal Loan Foreclosure Charges?

Foreclosure fees are charged a loan when the loan’s principal and interest are paid in full before the due date. Since banks make most of their money from charging interest, they have personal loan charges in place to make up for some of the interest they will lose if a loan is paid off before its full term. Piramal Finance offer "Zero" pre payment and foreclosure charges on personal loan.

Instructions for a Personal Loan Foreclosure

Borrowers must wait out the lock-in term before settling their personal loan account.  If you are considering personal loan foreclosure, here are the steps to follow:

  • Find the nearest branch: Personal loan foreclosures cannot be requested online. You must visit the bank or financial institution from which you borrowed money.
  • File for foreclosure:  Send a letter to the bank stating your intent to repay the debt. Your account number and other personal loan details are required for this.
  • Submit documents: Submit the required documents to the bank.
  • Wait for bank notification: Your bank or financer will review all submitted documents. Then, they will calculate how much you owe them based on EMIs and interest.
  • Repay the loan: Pay back the loan balance with any charges levied by the lender. Internet transfer, cash, cheque, or demand-draft payment can be used to pay off a personal loan.
  • Foreclosing the loan: After all payments and costs are paid, the bank will process personal loan foreclosure. The loan provider will return all original papers and stop sending EMI reminders and instructions.
  • Communicate with rating agencies : Early loan repayment might boost your credit score. After taking all essential actions and paying off the debt, it is important to notify credit bureaus of the personal loan foreclosure.

Benefits of a Personal Loan Foreclosure

One of the best things about prepayment is that it can help you save money. Since most unsecured personal loans do not ask for collateral, they probably charge a higher interest rate. At first, most of your monthly payments for a personal loan go toward the interest, while the principal balance goes down very slowly over time. Because of this, paying off your loan early can save you a lot of money that you would have spent on interest.

When you pay off your student loans early, you get out of debt. It will give you a confidence boost, give you back control of your money, and save your interest money.

Disadvantages of Personal Loan Foreclosure

Fees are a normal part of the foreclosure process, and all lenders charge them. This means you will have to pay more than just the principal balance for personal loan foreclosure. Foreclosing a personal loan can cost you more money if the principal is not very big. So, you should only foreclose your personal loan if it saves you enough money.

There are some situations where paying off a debt early, along with other factors, could hurt your credit score. So, do thorough research on your lender’s terms and how they will affect your credit.


If you need to get out of your debt, personal loan foreclosure or preclosure is a good idea. Find out the pros and cons before deciding. Particularly, personal loan charges should be taken into account. If you want to read more articles like this one and avail of smooth financial services.