Worked example
Example with the default numbers — change them above.
Loan amount: ₹50,00,000 · Interest rate (per year): 8.5% · Original loan tenure: 20 yrs · Close the loan after how many EMIs: 60 · Foreclosure charge: 0%
Closing your ₹50 L loan after 60 EMIs takes ₹44.06 L, saves ₹34.04 L of interest (62.9%) and ends the loan 15 yrs early.
| Interest saved | ₹34.04 L · 62.9% of the original interest |
|---|---|
| Tenure cut | 15 yrs · 75% of the original 20 yrs |
| Pay to close the loan | ₹44.06 L · ₹44.06 L principal, no charges |
| Net saving after charges | ₹34.04 L · no charges assumed |
| Total you pay in all | ₹70.1 L · was ₹1.04 Cr |
How the Loan Preclosure Calculator works
- Enter your original loan amount, rate and tenure, and the number of EMIs you will have paid when you close the loan.
- The calculator builds the full month-by-month schedule and reads off the balance still owed right after that EMI.
- The foreclosure charge is a percentage of that balance, plus any flat fee and GST you enter. The payoff amount is the balance plus the charge.
- The interest you save is the interest you would have paid on the remaining months, which no longer exists.
- Net saving is that interest minus the charges, so you can tell whether closing early is worth it.
Preclosure formulas
Payoff amount = outstanding principal + foreclosure charge
Foreclosure charge = (outstanding × charge % + flat fee) × (1 + GST %)
Interest saved = original total interest − interest paid until closure
Net saving = interest saved − foreclosure chargeAssumptions and limits
- Interest is charged monthly on the reducing balance at a rate that does not change. For a floating-rate loan, a rate change will alter the real figures.
- The balance at closure is rebuilt from your original loan, the rate you enter and the full tenure. If your rate changed during the loan, your lender's outstanding balance will differ; ask for a foreclosure statement.
- The loan is closed right after an EMI. Interest for part of a month is not added; your lender's foreclosure statement is the final word.
- The default charge is zero. RBI's Pre-payment Charges Directions, 2025 bar prepayment and foreclosure charges on floating-rate loans to individuals, and on most floating-rate business loans to individuals and small enterprises, sanctioned or renewed from 1 January 2026; earlier RBI rules already barred them on floating-rate personal (non-business) loans. Fixed-rate loans, and loans in a fixed-rate phase, can carry a charge, but only if it is written in your sanction letter and Key Facts Statement.
- The money used to close the loan is assumed to have no better use. Compare it with what that cash could earn elsewhere.
- EMIs are rounded to the nearest rupee and the last EMI is adjusted to clear the loan.
Frequently asked questions
What is loan preclosure and how much do I pay?
Preclosure, or foreclosure, means paying off the whole loan before the tenure ends. You pay the outstanding principal after your latest EMI plus any foreclosure charge and applicable taxes. On a ₹50 lakh loan at 8.5% over 20 years, closing after 60 EMIs needs about ₹44.06 lakh with no charge.
How much interest do I save by closing my loan early?
You avoid all the interest on the remaining months. Closing the ₹50 lakh, 20-year loan at 8.5% after 5 years means paying about ₹20.10 lakh in interest rather than about ₹54.14 lakh, a saving of about ₹34.04 lakh or 62.9%. Closing after 10 years saves about ₹17.07 lakh.
Do banks charge a foreclosure fee?
Not on most floating-rate loans to individuals. RBI's Pre-payment Charges Directions, 2025 bar prepayment and foreclosure charges on floating-rate loans to individuals, and on most floating-rate business loans to individuals and small enterprises, sanctioned or renewed from 1 January 2026; earlier RBI rules already barred them on floating-rate personal (non-business) loans. Fixed-rate loans, and loans in a fixed-rate phase, can carry a charge, but only if it is written in your sanction letter and Key Facts Statement. On a fixed-rate loan the charge is often a percentage of the outstanding principal plus GST; ask your lender for a foreclosure statement. RBI also requires lenders to return your property documents within 30 days of closure.
Is preclosure better than part prepayment?
Preclosure removes the loan and all later interest, but needs a large sum at once. Part prepayment cuts the balance gradually and keeps your cash flexible. If you cannot close fully, a part payment still saves interest. Compare both in the loan prepayment calculator before using your savings.
What happens after I close my loan early?
You pay the foreclosure amount, then collect a loan closure certificate or no-dues letter. If the loan was secured, ask for the original property or vehicle documents back and check the lien is removed. A loan closed on time shows as closed on your credit report; check the record after a few weeks.
When is it not worth closing a loan early?
If the charges exceed the interest you save, closing costs more than waiting; the calculator flags this. It may also not be worth it if the cash would drain your emergency fund or you could earn more than the loan rate elsewhere after tax. Check the net saving before deciding.
Sources
- RBI (Pre-payment Charges on Loans) Directions, 2025 – no charges on floating-rate loans to individuals sanctioned or renewed from 1 Jan 2026
- RBI: reset of floating interest rate on EMI-based personal loans (your choice of higher EMI or longer tenure)
Logic and rates last verified on .
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Guides that go deeper
See worked examples
Interest saved and months cut by prepaying ₹1 lakh to ₹25 lakh on ₹30 lakh to ₹1.5 crore home loans.
- How much do you save by prepaying ₹1 lakh on a ₹30 lakh home loan? — Saves ₹3.34 L, 1 yr 4 mo sooner
- How much do you save by prepaying ₹3 lakh on a ₹30 lakh home loan? — Saves ₹8.74 L, 3 yrs 9 mo sooner
- How much do you save by prepaying ₹5 lakh on a ₹30 lakh home loan? — Saves ₹12.9 L, 5 yrs 8 mo sooner