Closure, hypothecation & RC
Car Loan Foreclosure & Prepayment
Foreclosure charges by bank, RBI rules on floating-rate loans, and how to close your car loan and get the NOC.
Updated 27 September 2026 · 8 lenders trackedLowest car loan rate
7.45%
Canara Bank Car LoanWhat you need to know
Foreclosure means repaying the whole outstanding loan before the tenure ends. Floating-rate car loans to individuals carry no charge; fixed-rate loans charge what the KFS says — from nil after 24 months at ICICI Bank to 6% in the first year at HDFC Bank.
Charges by bank
| Lender | Rate type | Prepayment / foreclosure |
|---|---|---|
| SBI Car Loan | MCLR-linked (3-month MCLR 8.25%) | No prepayment charge; foreclosure charge waived after 2 years |
| Canara Bank Car Loan | Repo-linked (RLLR 8.00%) | No prepayment penalty |
| PNB Car Loan | Floating (RLLR 8.10%) or fixed | Floating nil; fixed 2% |
| Bank of Baroda Car Loan | Floating (BRLLR) or fixed | Floating nil; fixed 2% above ₹40,000 in first 2 years |
| Union Bank of India Car Loan | Floating (EBLR 8.00%) | Nil |
| HDFC Bank Car Loan | Fixed | 6% / 5% / 3% by loan age |
| ICICI Bank Car Loan | Fixed | 3% / 2%, nil after 24 months |
| Axis Bank Car Loan | Fixed | 5% |
RBI rules
| Situation | Rule |
|---|---|
| Floating-rate loans to individuals (non-business) | No prepayment / foreclosure charge — any lender, part or full, from any source of funds |
| Loans sanctioned or renewed from 1 Jan 2026 | RBI (Pre-payment Charges on Loans) Directions, 2025 also bar charges on floating-rate business loans to individuals and MSEs at most banks and large NBFCs; no minimum lock-in |
| Fixed-rate loans | Lender may charge as per the sanction letter and Key Facts Statement |
| Disclosure | Any charge must be shown in the sanction letter, loan agreement and KFS; waived charges cannot be levied later |
Example
| Case | Cost of foreclosing |
|---|---|
| Outstanding ₹4,00,000, charge 3% + GST | Charge ₹14,160 |
| Outstanding ₹4,00,000, charge 5% + GST | Charge ₹23,600 |
| Outstanding ₹4,00,000, floating-rate loan | Charge nil |
How to foreclose
- Ask for a foreclosure statementShows principal, interest to date and any charge; valid to a date.
- PayBy NEFT / cheque / net banking as instructed.
- Collect NOC + Form 35Plus any original documents the bank holds; RBI requires release within 30 days of full repayment, with ₹5,000 per day compensation for delays caused by the lender.
- Remove hypothecationApply to the RTO / Vahan with Form 35 and NOC.
Foreclosure calculator
Frequently asked questions
Is foreclosing always worth it?
Compare the interest still left with the charge. Near the end of the loan most EMI is principal, so the saving is small.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.