Foreclosure Calculation Explained

What is Loan Foreclosure?

Loan foreclosure is the total repayment of the balance loan amount in one single payment instead of paying it back in multiple EMIs (Equated Monthly Instalments). Unlike in a loan top-up, where one increases the existing loan amount. In a foreclosure, borrowers arrange for a lump sum amount, thereby becoming financially debt-free and saving future interest. Prepayment of loans can have a positive impact on the credit score and reputation of the borrower. Sometimes, for secured loans foreclosure also refers to the act of lenders recovering the amount owed to them on defaulted loans by taking ownership of pledged assets and selling the mortgaged property. This is why foreclosure, when initiated by the borrower, is more commonly referred to as prepayment or pre-closure. 

Foreclosure Charges

If one wishes to foreclose before the end of the loan tenure, they have to keep in mind foreclosure charges. These are charged to compensate for the lost interest income due to the pre-closure. Below are  foreclosure charges for SMFG India Credit’s personal loans:

Please note that as per our current policy, we only accept prepayments on personal loans in full. Thus, if you wish to prepay or foreclose your personal loan, you must be prepared repay the entire outstanding amount along with applicable fees and charges.

For detail on foreclosure charges of other loans, please refer to our loan charges page.

Importance of Foreclosure Calculation

How to calculate the foreclosure loan amount? Foreclosure calculators assist in doing that. Our predetermined fees allow you to receive the clarity anytime you need. It is a simple process that calculates the pending balance of the loan amount along with the interest payment based on the below details:

1. Pending loan amount
2. Loan tenure
3. Rate of interest at which the loan was borrowed
4. Number of EMIs cleared
5. Foreclosure month
6. Charges to be incurred in foreclosure of the loan 

Foreclosure calculator considers all the above factors and calculates the final amount that is to be paid by the borrower in the prepayment process.

Understanding Foreclosure Month

Foreclosure month is extremely important as the exit charges are levied on pre-closure based on that month. It is the month from the agreement date in which you repay the amount of loan in advance. If your loan tenure is 5 years and you decide to repay the loan after 1 year and 2 months, then that month is your foreclosure month. 

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