Foreclosure
Foreclosure is closing a loan in full before its tenure ends by paying the entire outstanding balance. It saves all the remaining interest; fixed-rate loans may charge a foreclosure fee.
Updated
Foreclosure (sometimes called pre-closure) is the act of repaying everything you still owe on a loan in one go, well before the scheduled end of the tenure. Because a loan’s interest is charged only on the outstanding balance, closing that balance early wipes out every rupee of interest you would have paid over the remaining months.
It is different from a partial prepayment, where you pay off only a chunk of the principal and keep the loan running. Foreclosure ends the loan entirely. On floating-rate retail loans, lenders generally cannot charge a foreclosure penalty, but fixed-rate loans often carry a charge of a couple of percent on the amount closed — always confirm the exact terms with your lender before you commit the funds.
Once the loan is fully settled, ask the lender for a No Objection Certificate (NOC) and ensure any lien or charge on the asset is released, so your ownership records are clean.
Worked example. On a ₹10,00,000 loan at 9% for 10 years, foreclosing after 3 years (month 36) saves about ₹2,76,736 in interest versus running the full term. That is a large saving, but you do tie up a big lump sum, so weigh it against your emergency reserves and other goals.
These figures are estimates. To test your own numbers, try the EMI calculator, and read our deep-dive on how foreclosure affects total interest to see where in the tenure closing early helps most.