Are there prepayment charges?

Part-prepayment is often allowed in a LAMF overdraft without a separate charge because flexible repayment is central to the product.

However, the exact rule depends on the lender and facility.

A payment that simply reduces utilisation is different from:

• Permanent foreclosure
• Balance transfer
• Formal facility closure

Check whether the lender applies:

• A minimum repayment amount
• Transaction fees
• Special charges for certain borrower types
• Different rules for business-purpose facilities

What counts as prepayment

Any principal paid before the final due date can be described as prepayment.

In a revolving overdraft, however, routine deposits that reduce the utilised balance may simply be part of normal account operation rather than a special prepayment event.

Why early payment helps

Interest is normally calculated on the daily utilised balance.

This means that repaying earlier reduces the number of days on which interest is charged.

For example, if you repay ₹2 lakh ten days earlier than planned, you avoid ten days of interest on that ₹2 lakh.

The resulting saving may be greater than any small transaction charge.

Do not confuse three actions

Part-payment

Reduces the outstanding principal.

Zero balance

May leave the credit line open and available for redraw.

Foreclosure

Permanently closes the credit line.

Balance transfer

Usually involves settling one lender and creating a new facility with another lender.

Each action can have different charges and procedures.

Check the Key Fact Statement

The Key Fact Statement should disclose applicable prepayment or foreclosure charges.

If the fee schedule says nil, confirm whether that applies to:

• Your borrower category
• Your loan purpose
• Your exact facility

Confirm the action and its charge

Part-payment, zero balance, foreclosure, pledge release and annual renewal are separate events.

Tell the lender exactly what you want to do.

Request the applicable:

• Charge
• Procedure
• Timeline

in writing.

Keep the confirmation after payment or closure.

Information on this page is general in nature. Eligibility, approved schemes, LTV, rates and charges depend on the regulated lender's current policy and the final loan documents. This is not financial advice. The content is purely for educational purposes.