When taking a personal loan, most borrowers focus on the interest rate, tenure, and EMI. But there’s one aspect often overlooked: prepayment charges. If you plan to repay your loan early to save on interest, understanding personal loan prepayment charges becomes crucial.
This blog will cover everything—from how prepayment works, to using calculators to plan your finances, to actual prepayment charges from top Indian banks like HDFC and Axis Bank.
Table of Contents
What is Personal Loan Prepayment?
Personal Loan Prepayment refers to repaying your loan before the originally scheduled tenure—either partially (part-payment) or completely (foreclosure).
Types:
- Part-Prepayment: You pay a lump sum amount while continuing regular EMIs.
- Full Prepayment/Foreclosure: You repay the total outstanding loan in one go.
Most lenders allow prepayment after a lock-in period of 6 to 12 months and charge a fee for it.
Understanding Prepayment Charges on Personal Loans
When you’re managing a personal loan, one of the smartest financial moves you can make is prepaying the loan early. This simple step can potentially save you thousands—if not lakhs—of rupees in interest. But before you go ahead and repay your loan ahead of schedule, it’s crucial to understand a key aspect that could impact your decision: prepayment charges.
What Are Prepayment Charges?
Prepayment charges are fees imposed by banks and Non-Banking Financial Companies (NBFCs) when a borrower chooses to repay a loan—either in full (foreclosure) or partially—before the end of the agreed tenure.
These charges are essentially a way for the lender to recover some of the interest they would have earned had the loan run its full course.
When Do These Charges Apply?
Prepayment charges aren’t universal and depend on several factors, such as:
- Time elapsed since disbursal: Most lenders don’t allow any kind of prepayment until at least 6–12 EMIs have been paid. After this lock-in period, charges may reduce over time.
- Fixed vs. Floating Interest Rate: Loans with floating rates (especially under regulatory guidelines) may be exempt from prepayment penalties. However, fixed-rate loans usually attract a charge.
- Bank/NBFC policies: Each lender has its own structure and percentage charges. For instance, HDFC Bank does not allow part-prepayment, while Axis Bank may allow it under conditions.
Common Prepayment Charges You Should Know
| Scenario | Charge |
|---|---|
| Standard prepayment (after lock-in) | 2% – 5% of outstanding amount |
| Prepayment within first 12 months | Usually not allowed |
| Floating rate loans (individual borrower) | Often NIL |
| Prepayment charges GST | 18% GST applicable |
Some banks may waive off loan prepayment charges under certain conditions, such as:
- Loyalty programs or special offers
- Relationship with the bank (existing customer benefits)
- Loans under ₹50,000
- Loans paid via own funds (vs balance transfer)
How a Personal Loan Prepayment Calculator Works
If you’re considering prepayment, a personal loan prepayment calculator is your best ally. It takes away the guesswork and lets you simulate different prepayment scenarios instantly—so you know whether it’s financially beneficial to close your loan early.
What Is a Prepayment Calculator?
A personal loan prepayment calculator is an online tool designed to help you estimate:
- How much interest you’ll save
- The revised EMI or reduced loan tenure after prepayment
- The total prepayment charges applicable
It’s a powerful financial planning tool that puts the math in your hands.
Inputs Required for Accurate Results:
To get precise insights, you’ll need to provide the following:
- Original Loan Amount – The total borrowed amount.
- Interest Rate – The annual interest rate applicable to your loan.
- Total Tenure – The full repayment period agreed (in months or years).
- EMIs Paid Till Date – How many installments you’ve already paid.
- Prepayment Amount – The lump sum amount you want to pay now.
What You’ll Get in Return (Outputs):
The calculator will process your inputs and provide you with:
- ✅ Interest Saved: How much less you’ll pay in interest by prepaying now.
- ✅ New EMI or Tenure: Depending on your preference, you can either reduce your monthly EMI or shorten your loan tenure.
- ✅ Revised Amortization Schedule: A fresh EMI breakdown after prepayment.
- ✅ Applicable Charges: The total prepayment fee + GST applicable based on your bank’s policy.
Pro Tip for Borrowers
Always use calculators from:
- Your bank’s official website
- Trusted finance marketplaces like BankBazaar, Paisabazaar, Groww, or Moneycontrol
These tools often factor in real-time bank policies, including prepayment rules and fee structures—giving you a more accurate forecast.
Real-Life Example: How Prepayment Saves You Money
Let’s assume:
- 📌 Loan Amount: ₹5,00,000
- 📌 Interest Rate: 13% per annum
- 📌 Loan Tenure: 5 years (60 months)
- 📌 EMI Paid So Far: 24 months
- 📌 Outstanding Principal after 24 EMIs: ₹3,12,000 (approx.)
- 📌 Prepayment Amount: ₹1,00,000 (one-time lump sum)
- 📌 Prepayment Charge: 4% of prepaid amount + 18% GST
Without Prepayment
| Description | Value |
|---|---|
| Monthly EMI | ₹11,377 |
| Total Amount Paid Over 5 Years | ₹6,82,620 |
| Total Interest Paid | ₹1,82,620 |
With ₹1,00,000 Prepayment After 24 Months
✅ Prepayment Details:
- Prepayment Charge (4%): ₹4,000
- GST on Charges (18%): ₹720
- Total Prepayment Cost: ₹4,720
- Effective Prepayment: ₹95,280 goes toward principal
What Changes?
- Interest Saved: ₹23,000–₹25,000 (approx.)
- New EMI (if kept same): Tenure reduces by 6–8 months
- New Tenure: Around 52 months instead of 60
- Net Savings After Charges: ₹18,000–₹20,000
✅ That’s a net gain of ~₹20,000, just by prepaying ₹1 lakh!
Summary Table
| Factor | Before Prepayment | After Prepayment |
|---|---|---|
| EMI | ₹11,377 | ₹11,377 (same) |
| Total Tenure | 60 months | 52–54 months |
| Total Interest Paid | ₹1.82 Lakhs | ₹1.58–1.60 Lakhs |
| Prepayment Charges (incl. GST) | — | ₹4,720 |
| Net Savings | — | ₹18,000–₹20,000 |
Key Takeaways from This Example
Always use a personal loan prepayment calculator to forecast your exact savings and compare them with the fee you’ll pay.
Even after paying prepayment charges, the interest saved is significantly higher, making prepayment a smart financial move.
The earlier you prepay in your loan tenure, the higher your savings.
HDFC Personal Loan Prepayment Charges
HDFC offers competitive personal loans but does not allow part-prepayment.
Key Details:
- Prepayment Allowed: Only after 12 EMIs
- Charges:
- 13–24 months: 4%
- 25–36 months: 3%
- After 36 months: 2%
- No part-payment allowed
- GST Extra on prepayment fees
Example: If your outstanding principal is ₹1,00,000 after 18 months, your loan prepayment charges will be ₹4,000 + 18% GST.
Axis Bank Personal Loan Prepayment Online
Axis Bank offers better flexibility and allows part-prepayment as well as online foreclosure.
Online Prepayment Process:
- Login to Axis Internet Banking or Mobile App
- Go to “Loans” section
- Select the loan and choose Prepayment/Foreclosure
- View prepayment amount and fee
- Pay via Net Banking or UPI
Charges:
- After 12 EMIs: Prepayment allowed
- Prepayment Fee: 2%–5% of outstanding principal
- Part-payment: May be restricted to a certain number of times per year
✅ Good to Know: Some Axis loan products offer lower charges for salaried professionals.
Top Banks with Prepayment Options & Charges Table
| Bank/NBFC | Lock-in Period | Part Prepayment | Prepayment Charges |
|---|---|---|---|
| HDFC Bank | 12 months | ❌ Not Allowed | 2–4% |
| Axis Bank | 12 months | ✅ Yes | 2–5% |
| ICICI Bank | 6 months | ✅ Yes | 3–5% |
| IDFC FIRST Bank | 3 months | ✅ Yes | 0–2% |
| Tata Capital | 6 months | ✅ Yes | 0–4% |
| Navi | No Lock-in | ✅ Yes | 0% |
🌟 Best Choice for Prepayment: Navi (No charges + full flexibility)
Tips to Save on Prepayment Charges
- Choose lenders with low/zero prepayment penalties
- Wait till lower charge periods (e.g., post 36 months for HDFC)
- Use a prepayment calculator to assess if it’s worth paying the fee
- Negotiate with the bank if you’re a long-term or premium customer
- Read the loan agreement carefully to avoid surprises
FAQs
Q1. What is a personal loan prepayment calculator?
A personal loan prepayment calculator is a digital tool that estimates how much interest you’ll save and what charges you’ll incur if you repay your loan early.
Q2. Do all banks charge prepayment fees?
No. Some banks like Navi and IDFC FIRST offer zero or very minimal charges, while others like HDFC or ICICI may charge 2–5% depending on tenure.
Q3. Is part-prepayment better than full prepayment?
It depends. Part-prepayment reduces interest and tenure, while full prepayment helps you close the loan and improve your credit score faster.
Q4. Are loan prepayment charges negotiable?
Sometimes, yes. Especially if you have a good repayment history or a relationship with the bank.
Q5. Can I prepay my personal loan online?
Yes. Many banks like Axis, ICICI, and IDFC FIRST offer online prepayment facilities via net banking or mobile apps.
If you’re planning to repay your loan early, knowing the personal loan prepayment charges is essential. It helps you make an informed decision, calculate potential savings, and avoid unnecessary fees. Whether you’re with HDFC, Axis, or any other bank, the key lies in understanding the terms and using online tools effectively.
👉 Check out our detailed guide:
Best Personal Loan Banks 2025 – Compare Interest Rates
