Why this is different from a generic prepayment calculator
Our loan prepayment calculator starts with the prepayment charge at 0% and lets you enter the charge on your own loan, if any, with GST. Personal loans are the exception worth calculating separately: most are sanctioned at a fixed rate, which typically falls outside that protection — so a real foreclosure charge is common, and it can be large enough to offset some or all of the interest you'd save.
How this calculator works
Foreclosure cost = (Outstanding principal × Foreclosure %) × 1.18 if GST is included, else × 1.
Net savings = Interest saved − Foreclosure cost.
A worked example
₹3,00,000 outstanding at 14% p.a. with 24 months remaining, a 3% foreclosure charge plus 18% GST on that charge:
The EMI is about ₹14,404. Continuing for the remaining 24 months would cost roughly ₹45,693 in interest. The foreclosure charge is ₹9,000 (3% of ₹3,00,000), plus ₹1,620 GST — a total cost of ₹10,620 to close the loan today. Net savings: roughly ₹35,073 — foreclosing is clearly worthwhile here, though the charge alone consumed about 23% of the potential saving.
The math changes fast for a loan close to its end. Take a separate, smaller case: ₹40,000 outstanding at the same 14% p.a. with only 3 months left. The interest still owed is only about ₹937 — but the same 3% charge plus GST comes to roughly ₹1,416. Here, foreclosing would cost about ₹479 more than it saves. Near the end of a loan, or on a small remaining balance, simply finishing the last few EMIs can be the cheaper option.
When foreclosing genuinely makes sense
- Early in the loan, when most of the EMI is still interest. The earlier you close, the more future interest you avoid, and the more room there is to absorb the charge.
- When the charge is low or waived. Some lenders waive foreclosure charges after a minimum holding period, or for certain loan categories — always ask.
- When you have no better use for the lump sum. Compare against your other options — see when prepayment makes sense versus investing the money instead.
Near the end of the tenure, or when the charge percentage is high, run the numbers first — this is exactly the case where "obviously pay it off early" can be the wrong instinct.