Preclosure of Personal Loan – Benefits, Tenure, Impact, Steps & Charges

Are you wondering how to close a personal loan early and save money on interest? The preclosure of a personal loan (also called foreclosure of personal loan) lets you repay your entire outstanding loan amount before the end of the tenure. This not only reduces your interest outgo but also helps you become debt-free sooner. 

Before you go ahead, it’s important to calculate whether the savings outweigh the charges and check if your lender allows pre-closure after the mandatory lock-in period.  

This guide covers everything you need to know, the meaning, benefits, charges, documents required and credit score impact, so you can make the right choice. 

What is Personal Loan Pre-closure? 

Personal loan pre-closure means making a lump sum repayment of the outstanding principal and interest before the scheduled tenure ends. Lenders call this a foreclosure of personal loan because your account is closed before its original term. 

You can usually do this only after the lock-in period, which is typically 6–12 months. If you don’t want to close personal loan completely, you can also opt for partial prepayment, where you pay a portion of your loan early to reduce EMIs or tenure. 

Is it Good to Close a Personal Loan Early? 

Yes, but here are the factors you should check before going for preclosure of personal loan: 

• Save on Interest: The earlier you repay, the more you save on total interest. 

• Foreclosure Charges: Lenders may charge 2–5% of the outstanding principal as fees. 

• Financial Readiness: Ensure you have enough funds and won’t affect your other goals. 

• Lock-in Period: Confirm you have completed the required lock-in months. 

• Credit Score Impact: Preclosure has a small temporary effect but improves your score over time. 

• Consider Partial Prepayment: If funds are tight, reduce EMIs through partial prepayment rather than full closure. 

Partial Prepayment vs. Full Pre-closure 

Aspect	Partial Prepayment	Full Pre-closure
Payment Amount	Pay part of your principal	Pay entire principal + interest due
Effect on EMIs	EMI/tenure reduces gradually	Loan closed completely
Charges	Usually lower or NIL	Usually 2–5% of principal
Savings	Moderate savings on interest	Maximum savings on interest

Additional Documents Required for Pre-closure 

To close personal loan successfully, lenders may require the following documents: 

• Loan account statement with outstanding balance 

• PAN card / Aadhaar card (for verification) 

• Cheque/Demand Draft/Netbanking proof of payment 

• Written request for pre-closure 

• Loan agreement copy (if needed) 

Important: After payment, collect a No Objection Certificate (NOC) and closure confirmation to update your credit report. 

Impact of Pre-closure on Credit Score 

Foreclosure of personal loan does not harm your credit score in the long run. Initially, your score may dip slightly due to change in credit mix, but over time, being debt-free improves your credit health and CIBIL score. 

Things to Consider Before and After Pre-closure 

• Verify lender’s pre-closure policy and charges. 

• Maintain enough funds before initiating the process. 

• Avoid liquidating critical investments unless savings are significant. 

• Choose partial prepayment if full payment stresses finances. 

• Update your credit report after closure for accuracy. 

Close Your Loan with Fibe Easily 

With Fibe Instant Cash Loan, you get up to ₹5 Lakhs at affordable interest rates and the option to prepay or foreclose easily. This allows you to repay on your terms and save on interest. 

Download the Fibe App or visit our website today to apply and manage your loan with complete flexibility. 

FAQs on Pre-Closing a Personal Loan 

1. Does early closure of the loan affect CIBIL score? 

 No major negative impact. Your score usually improves over time once the loan is marked ‘closed’. 

2. Can I pay all EMIs at once? 

 Yes, this is called foreclosure of personal loan. Check if any pre-closure charges apply. 

3. Can I close a personal loan in 1 year? 

 Yes, if your lender allows preclosure after the lock-in period (generally after 12 EMIs).