Can I pre-close a Personal loan after 3 months of first emi?


Hi, Currently I have a personal loan for which I am paying 17% diminishing Rate of Interest. And another bank just offered me at 11% flat… I would like to pre-close this loan and take the other loan. However, when I contacted the bank they said I cannot foreclose the loan until completion of 12 emi’s.

Is it true?I heard there has recently been a ruling that personal loans can be closed at any time.


Dear Priya,
Unlike home loan where RBI has come down heavily on prepayment penalty, personal loan is still an open area where banks decide the rules on prepayment. However, prepayment penalty should not be legal in any case.

Most of the banks fix a timeframe before which you cannot close the loan by paying the outstanding amount. At the same time, banks also impose a penalty on prepayment. For example, banks may ask you to pay 1% of the principal outstanding as penalty (or processing fee).

I would suggest you talk to the bank (send email so that you have proof of communication). If they don’t respond, you may want to escalate the issue to higher authority of bank or even to the banking ombudsman.



Preclosure of Personal Loans differs from one lender to another. Most lenders impose a waiting period before which you cannot close your Personal Loan. This period could range anywhere between 3 months and 2 years. You must read the terms and conditions of your loan agreement to understand the waiting period. There might also be charges for foreclosure. This will also be mentioned in the agreement.

In your case, we suggest that you consider a balance transfer of your Personal Loan. A Personal Loan balance transfer works exactly like a Credit Card balance transfer. You get to avail a better rate of interest and a better loan offer by transferring your loan balance.

It could mean transferring it to another bank or switching to another loan offered by the same bank. It all depends on the availability and rules of the banks involved.

Want to check out Personal Loan offers from other lenders? Click here.

BB Expert



Debt counselling is a relatively new concept in India, but one that is totally necessary. Awareness regarding this service is relatively low though. Banks have always felt that there is a need to educate the consumer on financial literacy and in a move to encourage this, Reserve Bank of India (RBI) came out with a concept of debt counselling, while Financial Literacy and Credit Counselling (FLCC) centres were started in April 2008. These centres could prove to be a great resource for not only for those burdened with debt, but also for loan applicants who want to choose the right loan products so that they don’t end up with high amounts of debt.

These counselling centres have experts to help those with huge debts by providing them with the best options to manage their money. Some of these centres include Bank of India-supported Abhay (http:www.bankofindia.con/abhay.aspx) and ICICI Bank-backed Disha ( These counselling centres help set up a meeting with experts to take a call on a problem you may have with repaying your loan or a counselling session to arrive at the best option to manage your loans.

Want to check out Personal Loan offers? Click here.

BB Expert


Pre-closure of personal loan depends on the lender to lender. Most of the banks fix a timeframe before which you cannot close the loan by paying the outstanding amount. At the same time, banks also impose a penalty on prepayment. Some lender fixed their waiting period from 3 months to 6 months & after that you can go for foreclosure your loan amount without any charges. Best part is that now their many NBFC or fintech companies like Monexo does not charges on pre-closure of loan account.