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Business Loan Foreclosure Calculator

Loan Foreclosure

Last Updated 21st Jun 2021

  • Business Loan Foreclosure is a procedure in which a borrower pays off the business loan in partial or full before the tenure gets over.
  • Foreclosure is chargeable by some of the lenders, the charges ranges from Nil to 6% of the outstanding balance.
  • Foreclosure amounts are easy to calculate using a business loan foreclosure.
  • Business loans can be foreclosed by visiting the nearest lender’s branch.
  • Paying business loans before tenure ends has various benefits like increase in credit score, reduction in interest rate for future loans and many more.
Business Loan Prepayment Calculator
Best Offers on Business Loan offerOffers
Bank/NBFCs Rate* EMI per Lakh* Action
HDFC Bank11.90%₹ 2,628Check Eligibility
Bajaj Finserv18.00%₹ 2,937Check Eligibility
ICICI Bank16.50%₹ 3,540Check Eligibility

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What is Loan Foreclosure?

Business Loan Foreclosure is a legal procedure where a borrower can repay the whole loan amount before the loan tenure ends. Through this method, a borrower does not have to pay the equated monthly installments (EMIs) further and it also reduces the interest liability. To repay the loan amount before the tenure gets over, a borrower has to submit an application to the lender where they determine the foreclosure balance once the calculation is satisfactory, the borrower can close the loan.

What is a Business Loan Foreclosure Calculator?

Business loan preclosure calculator works like a calculator which helps you calculate the foreclosure amount for the business loan. It also calculates the interest saved by foreclosure of business loans .

How to use the foreclosure calculator?

Business loan foreclosure calculator is easy to use, you will get the results within few seconds by just providing inputs like:-

  • Business Loan Amount - Outstanding Loan amount that ranges from ₹ 50,000 to ₹ 100 Cr.
  • Loan Tenure - Number of years for which loan is taken which generally ranges from 1 months to 84 months.
  • Rate of Interest - The percent principal which lender is charging from a borrower
  • Number of EMIs Paid- Total number of EMIs which are paid till date
  • Foreclosure Month- Month in which a borrower would like to close the business loan
  • Foreclosure Charges- Foreclosure charges may range between 2%-6% of the outstanding loan amount

What is foreclosure month in Business Loan?

Foreclosure month is a month in which the borrower repays the business loan to the lender. The fees and penalty levied by a lender is decided considering the foreclosure month. The date is decided at the time of agreement. For example, if your loan tenure is for 4 years (4*12) 48 months and you decide to pay the loan in 2 years and 3 months then the foreclosure month will be 28 month.

Business Loan Foreclosure Charges

Foreclosure charges on business loans is the penalty which lenders levy as a prepayment penalty. Lenders charge foreclosure charges to meet the interest loss from the early closure of the loan. However, as per the guidelines of Reserve Bank of India dated 2nd November 2017, banks and NBFCs cannot charge foreclosure charges if a lender has opted for floating interest rate and the foreclosure charges for every lender is different.

The foreclosure charges levied by top banks on business loans are:

Bank Foreclosure Charges
SBI 3%
HDFC Bank 2 - 4%
ICICI Bank 5%
RBL Bank NIL foreclosure charges
Tata Capital 4.5% of outstanding balance
Lendingkart Nil foreclosure charges
Bajaj Finserv 4%
IDFC First Bank 4 - 5%
IIFL 7 - 12 months - 5 - 6% and after 12 months - nil charges
Bank of Maharashtra

Business Loan Foreclosure Procedure

The basic procedure, which is followed by most of the lenders, to prepay the loan is as followed:-

  • Visit the nearest bank branch from whom you have taken the loan.
  • Submit the duly filled foreclosure application form.
  • Submit the required documents like identity proof, loan documents, loan account details, past bank statements which works as proof for EMI payment.
  • The bank will tell the foreclosure amount, penalty charges and then the borrower can pay the outstanding loan amount through cheque, demand draft or online transfer in the form of NEFT or RTGS.
  • Once the payment is done, the bank will hand over the documents like Acknowledgement letter, Pre closure payment receipt, No dues certificate, and Loan closure certificate. Bank will also stop the EMI instructions.

Benefits of Paying off your Business Loan in Advance

Business loan foreclosure is a beneficial option and it is going to provide various benefits in the long run. Here are the advantages of paying the business loan before time:-

  • Save more money because you will have to pay less interest.
  • Improve the credit score. Foreclosure or prepayment is definitely going to improve the credit score.
  • Foreclosure is a positive factor for a credit score as it shows the credit worthiness of a person and it might also get business loan or any other loan at a better rate of interest if you need it in future.

FAQs

How is the foreclosure amount calculated?

Foreclosure amount is calculated using a foreclosure calculator. In the calculator you have to fill loan amount, interest rate, loan tenure, number of EMIs paid and foreclosure month.

How do you foreclose on a loan?

The procedure for foreclosure of business loans is different with every bank but generally, you need to visit the bank's branch, submit the application form, submit the required documents and pay the foreclosure amount.

How to use a business loan foreclosure calculator?

To use a business loan preclosure calculator you need to fill the loan amount, interest rate, loan tenure, number of EMIs paid, foreclosure charges (if any) and foreclosure month.

Can I apply for foreclosure anytime after borrowing a loan?

No, most of the banks allow foreclosure of loan after a selected period of time, which is generally between 6 months-12 month.


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