Before you rush to transfer your personal loan for a lower rate, understand all the charges involved — or you could end up paying more than you save.
Foreclosure Charges
Most banks charge 2–5% of the outstanding principal if you close a loan before tenure end. RBI has banned foreclosure charges on floating-rate retail loans, but personal loans with fixed rates still attract them.
Processing Fee on New Loan
The new lender typically charges 1–3% of loan amount as processing fee. On a ₹5 lakh loan, this is ₹5,000–₹15,000 upfront.
Break-Even Calculation
Example: ₹5L outstanding, 18 months left, old rate 16%, new rate 13%.
Monthly saving: ~₹750. Total fees: ₹10,000. Break-even: 13 months — barely worth it with only 18 left.
When to Say No
If you have fewer than 12 EMIs left, the savings rarely justify the costs. Use an online balance transfer calculator before deciding.