What is the foreclosure fee?
A personal loan tenure usually ranges from 3 months to 7 years. When an individual wants to close the personal loan before its scheduled tenure by paying the outstanding amount, it is known as foreclosure. Banks/NBFCs charge a foreclosure fee, which is usually a specified percentage (usually 2 to 5%) of the outstanding personal loan amount. The higher the fee percentage, the more it dissuades a borrower from foreclosing the personal loan, even if they have the money to foreclose it.
Let us look at some banks/NBFCs that don’t charge a foreclosure fee on some of their personal loan products. We will also discuss some banks/NBFCs that provide a conditional waiver of the foreclosure fee. The conditional waiver can be based on the number of EMIs paid, the loan amount, etc. Let us discuss them.
IDFC FIRSTmoney Smart Personal Loan
IDFC FIRST Bank offers the FIRSTmoney Smart Personal Loan with no foreclosure charges. An individual can get a personal loan of up to Rs. 10 lakhs with interest rates starting at 9.99%. Once you apply and complete the KYC, you will get approval for a specified amount based on your eligibility.
The unique feature of this product is that you can take the entire approved amount at one go or take it in tranches as required. You pay interest only on the amount used, not on the entire approved amount. Thus, you can get multiple personal loans, based on need, without the need to make a fresh application for every loan.
With no foreclosure charges, you can close the loan at any time without worrying about any additional fees.
Fibe personal loan
Fibe provides personal loans of up to Rs. 5 lakhs with a digital application process, instant approval, easy EMI options, and no foreclosure charges. An individual can choose a personal loan amount between Rs. 50,000 and Rs. 5 lakhs with a tenure of 6 to 36 months. The applicant must have a minimum in-hand monthly salary of Rs. 20,000. The entire application process is digital through the Fibe App or website.
Once the individual completes the verification by uploading the basic documents, they get approval in minutes. After completing the remaining formalities, the individual can get money in their bank account in minutes.
The borrower can foreclose the personal loan at any time without worrying about any extra fees, as Fibe doesn’t charge a foreclosure fee.
Poonawala Fincorp personal loan
Poonawala Fincorp provides personal loans with minimal documentation, quick approval, no hidden charges, no end-use restrictions, and at competitive interest rates. The company provides a conditional waiver of the foreclosure fees. If foreclosure is done with own funds after repayment of the first 6 EMIs, there will be no foreclosure charges.
However, if the foreclosure is done within the first 6 months or after 6 months (with any other source of funding, including balance transfer), a foreclosure fee of 4% on the amount being prepaid, plus taxes, will be levied.
ICICI Bank personal loan
ICICI Bank does not charge a foreclosure fee on personal loans after 12 EMIs have been paid. The bank provides personal loans of up to Rs. 50 lakhs with a repayment tenure of up to 72 months, with minimal documentation. There are no hidden charges and no collateral requirement.
Axis Bank personal loan
For personal loans wherein less than or equal to 36 EMIs have been paid, Axis Bank charges a foreclosure fee of 3% of the principal outstanding. For personal loans wherein more than 36 EMIs have been paid, the foreclosure fee is 2%. However, Axis Bank doesn’t charge a foreclosure fee on personal loans equal to or higher than Rs. 10 lakhs, provided the loan is closed from the borrower’s own funds.
Axis Bank offers personal loans of up to Rs. 40 lakhs with a repayment tenure of up to 84 months, with minimum documentation. The process is online with quick approvals. The minimum monthly income requirement is Rs. 15,000 for existing customers and Rs. 25,000 for new customers.
HDFC Bank Golden Edge Personal Loan
HDFC Bank offers the Golden Edge Personal Loan, a specialised premium loan, for its elite customers. The loan amount must be Rs. 15 lakhs or more. The interest rate starts from 9.99% p.a. onwards. There is no foreclosure fee. Loan closure can be done after 12 EMIs from own funds. There is no minimum income criteria for the Golden Edge Program.
Should you go for personal loans with no foreclosure fee?
The foreclosure fee usually ranges between 2% to 5% of the outstanding loan amount. If the outstanding loan amount is high, the foreclosure fee can amount to a significant sum. If the foreclosure fee amount is substantial, it can act as a deterrent for the borrower to go for it. Hence, a borrower should look for personal loans where no foreclosure fee is a standard feature.
If not a standard feature, the borrower must check for personal loans that provide a conditional foreclosure fee waiver. For example, check for personal loans that waive the foreclosure fee after a specified number of EMIs are paid. For example, some banks/NBFCs waive the foreclosure fee after 12 or 24 EMIs are paid.
When choosing a personal loan, in addition to the foreclosure fee waiver, a borrower must also consider various other factors. These include the processing fee and other charges, the interest rate, the tenure options, income and other eligibility criteria, etc. The borrower must evaluate all these factors, along with the foreclosure fee waiver, and make an informed decision accordingly.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.
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