Loan foreclosure calculator: methodology

What the calculator answers

"If I close my loan now, how much do I pay, what does the foreclosure charge add, and how much interest do I avoid?"

Foreclosure and preclosure mean the same thing here: repaying the whole outstanding loan in one go before the tenure ends. To pay off only part of a loan, use the prepayment calculator.

Inputs

• Original loan amount (P), interest rate (% per year, reducing balance) and tenure (n months)
• Number of EMIs already paid (k), from 0 to n − 1
• Optionally, the outstanding principal from your loan statement
• Foreclosure charge as a % of the outstanding principal, with optional GST (default 18%)

Formulas

Monthly rate r = annual rate ÷ 12 ÷ 100, and the EMI is the standard reducing-balance EMI:

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)        (EMI = P ÷ n when r = 0)

We build the month-by-month schedule with the same amortization routine as the EMI calculator. The outstanding principal after k EMIs is the closing balance of month k. If you enter the figure from your statement, we use that instead.

Foreclosure charge  = outstanding principal × charge%
GST on charge       = charge × GST rate          (if selected)
Amount to close     = outstanding principal + charge + GST on charge

To find what continuing would cost, we run the remaining n − k months on the outstanding principal with the same EMI, and the last EMI settles any rounding difference.

Interest you avoid  = interest in the remaining n − k EMIs
Net saving          = interest you avoid − charge − GST on charge

A negative net saving means the charge costs more than closing early saves, which can happen near the end of a loan.

GST applies to the foreclosure charge, not to the loan's interest. CBIC Circular No. 102/21/2019-GST (paragraph 6) clarifies that fees and other charges on a loan aren't "interest" and so aren't exempt. Financial services are taxed at 18% (9% central tax under Notification No. 11/2017-Central Tax (Rate), heading 9971, plus 9% state tax). Your foreclosure letter shows the GST your lender adds.

What RBI's rules say about foreclosure charges

The calculator doesn't build in any rule: you enter the charge from your loan agreement or Key Facts Statement (KFS). This is what RBI's rules say, so you can check whether a charge should apply.

Loans sanctioned or renewed on or after 1 January 2026

The Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025 apply to commercial banks (other than payments banks), co-operative banks, NBFCs and All India Financial Institutions.

For floating-rate loans:

• Individuals, for purposes other than business, with or without a co-borrower: no pre-payment charge.
• Business loans to individuals and micro and small enterprises: no pre-payment charge at commercial banks (other than small finance, regional rural and local area banks), Tier 4 urban co-operative banks, NBFCs in the upper layer and All India Financial Institutions. Small finance banks, regional rural banks, Tier 3 urban co-operative banks, state and central co-operative banks and NBFCs in the middle layer can't charge on loans with a sanctioned amount or limit up to ₹50 lakh.
• These apply without any minimum lock-in period, whether you prepay in part or in full, and whatever the source of the money.
• A dual or special rate loan (part fixed, part floating) is treated according to whether it is on a floating rate when you prepay.

For other loans, including fixed-rate loans such as many personal loans, the charge is as per the lender's approved policy, and:

• for a term loan, any charge must be based on the amount being prepaid;
• it must be disclosed in the sanction letter and loan agreement, and in the KFS where one is required; a charge that wasn't disclosed can't be levied;
• no charge can be levied when the prepayment is made at the lender's request;
• a charge the lender earlier waived can't be levied retrospectively at the time of prepayment.

Older loans

Loans sanctioned before 1 January 2026 follow the instructions in force when they were sanctioned. For example, RBI's circular of 7 May 2014 barred scheduled commercial banks from charging foreclosure charges or pre-payment penalties on floating-rate term loans to individual borrowers. The 2025 Directions repeal these earlier instructions from their effective date. If your loan should be charge-free under these rules, enter 0%.

Limitations

• Assumes the loan is closed straight after an EMI. Your lender will add interest for the days between your last EMI and the closure date, which this calculator leaves out.
• Assumes a fixed interest rate. For a floating-rate loan, the interest you avoid is an estimate at today's rate.
• Applies the charge to the outstanding principal. Some agreements define the base differently (for example, the amount prepaid including some interest); check yours.
• Excludes overdue EMIs, penal or bounce charges and any other dues.
• Savings are nominal rupees and don't account for what the money could earn if invested, or for tax benefits on interest that some loans have.