No Prepayment or Foreclosure Charges on Loan Against Property for Individuals - RBI

Last Updated 20th Jun 2019

Loan Against Property

6th June 2019 – RBI cuts repo rate by 25 bps to 5.75%

You can now prepay loan against property (LAP) without any penalty or charges in case your loan meets the following conditions:

  • Your loan has been sanctioned at a floating rate of interest and not a fixed rate. Almost all loans against property are on floating rates and it is highly unlikely that yours is at a fixed rate
  • The loan is sanctioned in the name of one or more individual borrowers and not corporate entities
  • Neither the borrower nor the co-borrower is a corporate entity (ltd. or pvt. ltd. company) or a firm (partnership or AOP)
Apply for Loan Against Property @ 8.80%*Get upto Rs. 5,000* Cashback

RBI Circular on Prepayment Charges

For loans from banks and NBFC's, refer to RBI circulars RBI/2013-14/ 582/ DBOD. Dir.BC.No. 110 /13.03.00/2013-14 dated May 7, 2014 and RBI/2014-15/121/ DNBS(PD).CC.No.399/03.10.42 /2014-15 dated July 14, 2014 for more details.

NHB Circular on Foreclosure Charges

For loans from Housing Finance Companies, refer to NHB circulars NHB(ND)-DRS-Policy-Circular-63-14-15 dated Aug 14, 2014 and NHB-ND-DRS-Policy-Circular-No-66-2014-15 dated Sep 03, 2014 for more details.

The National Housing Bank (NHB) has clarified that its circular dated August 2014 regarding withdrawal of prepayment charges (on both part prepayment and full foreclosure) is applicable only on floating rate loans sanctioned to individuals.

Loans where a company or a form is an applicant or a co-applicant are outside the purview of the said circular.

The NHB Circular of 14th August had extended RBI's ban on prepayment charges applicable on floating rate loans to loans granted by housing finance companies (HFC's) governed by the NHB. RBI had already banned penalty on partial or full prepayment of all floating rate loans to individuals sanctioned by banks and NBFC's. NHB's move is essentially aimed at aligning the regulations for all classes of lenders to one common basis.

In it's circular dated 3rd September, 2014, NHB has clarified that the August 14, 2014 circular is applicable to all floating rate loans sanctioned before or after 14th August but being repaid on or after the said date. Thus, the circular would override the contracted terms in the sanction letter and loan agreement executed before 14th August 2014 also.

Further, NHB has clarified that ban on prepayment charges would not be applicable for loans with companies or non individual as either primary borrower or co-borrower. In practice, very large volume and value of loan against property (LAP) are sanctioned with individuals as applicants and their business entities (pvt. ltd. companies and partnerships or firms) as co-borrowers. The NHB clarification means that such loans will continue to attract prepayment charges as contracted between the borrower and lender.

For more details and case specific guidance, contact MyLoanCare at 8448389600 or

Loan Against Property News - Jun 2019
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. MyLoanCare is an independent professional service provider and is not related to the government or government bodies or any regulator or any credit information bureau in any way. Information carried at this website is not and should not be construed as an offer or solicitation or invitation to borrow or lend. The Company does not undertake any liability with respect to the correctness of the content, information and calculations. Information is subject to change without notice. By submitting your query or using any tools or calculators, you authorize MyLoanCare to share your information with lender(s), consent for such lender(s) to access your credit information report and contact you regarding your query overriding your number being in National Do Not Call Registry. This is a free service and no charges are payable by the borrower to MyLoanCare. The Company may receive remuneration from lenders for services provided to them.
Please wait while your information is being processed...