Costs & repayment
Used Car Loan Foreclosure & Prepayment
Closing a used car loan early — charges by lender, RBI rules and the NOC process.
Updated 30 September 2026 · 8 lenders trackedLowest used car loan rate
9.45%
PNB Used Car LoanWhat you need to know
Floating-rate loans to individuals can be closed any time without charge under RBI rules. Many used car loans, however, are fixed-rate: ICICI Bank charges 3% in year one and 2% in year two, Tata Capital 5% – 6%, and Sundaram Finance does not allow foreclosure in the first 6 months. Compare the charge with the interest you will save.
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 |
Charges by lender
| Lender | Processing fee | Prepayment / foreclosure |
|---|---|---|
| PNB Used Car Loan | 0.25% of loan (min ₹1,000, max ₹1,500) + GST | Floating: nil; fixed: 2% of amount prepaid |
| Indian Bank Pre-owned Car Loan | As per the bank’s service-charge schedule — ask the branch | Individuals: nil; non-individuals: 2% |
| ICICI Bank Pre-owned Car Loan | 2% of loan, max ₹20,000 + GST | Foreclosure 3% + GST within 12 months, 2% + GST in months 13 – 24, nil after 24 months (fixed-rate) |
| Bank of Baroda Pre-owned Car Loan | 0.50% of loan + GST (min ₹2,500, max ₹10,000 + GST) | Floating: nil; fixed: nil up to ₹40,000 within 2 years, 2% + GST above that, nil after 2 years |
| SBI Pre-owned Car Loan | 1.50% of loan + GST (min ₹3,000, max ₹10,000 + GST) | No charge on floating-rate loans to individuals; check the KFS for fixed-rate terms |
| Tata Capital Used Car Loan | Up to 2.95% of loan + GST | Foreclosure / part-prepayment: 6% within 12 months, 5% after 12 months (where charges are permitted) |
| HDFC Bank Used Car Loan | As per sanction — see the KFS (not published on sources checked) | Fixed-rate loans may carry a foreclosure/part-payment charge — check the KFS |
| Sundaram Finance Used Car Loan | About ₹2,500 (aggregator) | Foreclosure not allowed in the first 6 months; penalty as per agreement (aggregator: 3% of principal outstanding) |
After closure
- Collect the closure letter and NOC.
- Get Form 35 signed by the lender and remove hypothecation on Vahan.
- Update the insurance policy.
- Check your credit report shows the loan as closed within about a month.
Foreclosure calculator
Frequently asked questions
Does foreclosure hurt my credit score?
No — a loan closed in full is reported as closed; it can help by reducing debt.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.