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Personal Loan

Early Personal Loan Repayment: Pros, Cons, and Hidden Costs Explained

30 Jul 2025 by Team FinFIRST

Benefits of Early Personal Loan Repayment

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Thinking of repaying your personal loan early? Here's how it really plays out.

When you take a personal loan, you typically commit to a fixed repayment tenure ranging between2 to 5 years. But what if your financial situation improves, and you want to pay off the loan faster? What happens if you try to repay a ₹5 lakh personal loan in just 9 months instead of 3 years? Can you really benefit from doing so?

At IDFC FIRST Bank, we encourage financially smart decisions. So, we ran the numbers for you.

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Repayment Cost for ₹5 Lakh Personal Loan: A Comparison

Let’s say you’ve taken a ₹5,00,000 personal loan at 9.99% p.a. interest — the rate offered on FIRSTmoney Personal Loan (subject to eligibility and credit score). Here’s how the total cost differs across repayment tenures:

Tenure	Approx. Monthly EMI	Total Interest Payable	Total Amount Payable
6 months	₹86,000	₹16,000	₹5,16,000
12 months	₹44,300	₹31,600	₹5,31,600
36 months	₹16,400	₹90,500	₹5,90,500
60 months	₹10,900	₹1,54,000	₹6,54,000

Key Insight:

Clearly, the shorter the tenure, the less you pay in interest. But your monthly burden increases significantly.

So, Should You Repay Your Personal Loan Early?

It depends on your financial flexibility. Here are some things to keep in mind:

When Early Repayment Makes Sense:

You’ve received a bonus or have a side income that you can set aside
You want to reduce your overall debt exposure
You're saving more on interest than you'd earn by investing the same funds elsewhere

When an Early Repayment Might Not Be Ideal:

You risk straining your liquidity or emergency fund
Your loan provider charges exorbitant foreclosure/prepayment penalties

What Are the Hidden Charges to Watch for During Prepayment

Not all loan providers are upfront about the actual cost of closing your personal loan early. Here are some common hidden charges you should check before making a prepayment:

Charge Type	What to Watch For
Foreclosure Fee	Many banks charge 2%–5% of the outstanding principal as a penalty for prepaying.
Lock-in Period	Some loan providers won’t allow foreclosure before you pay a min. number of EMIs, typically 6–12.
Partial Prepayment Charges	Even if you’re not closing the loan fully, partial prepayments may carry a fee.
Statement or Administrative Charges	A few loan providers add a small but cumulative processing fees during closure.
Interest on Full Month	Some loan providers charge interest for the entire month even if you close early in the cycle.

FIRSTmoney Personal Loan is Prepayment-Friendly

With IDFC FIRST Bank’s FIRSTmoney Personal Loan, we keep things simple:

✅ Zero foreclosure charges
✅ No lock-in period for prepayment
✅ 100% digital process
✅No hidden fees

Key Benefits:

Loan Amount: Up to ₹10 lakhs
Interest Rates: Starting at 9.99% p.a.
Tenure: Flexible from 9 to 60 months
Prepayment Policy: No charges on foreclosure, repay anytime
Disbursal: Instant and 100% digital process

FIRSTmoney Personal Loan: Flexibility Beats Rigidity

At IDFC FIRST Bank, we believe in rewarding discipline, not penalizing it. That’s why we’ve built our digital loan experience around your financial convenience, not hidden fine print.

So, whether you want to space out your repayments over 5 years or close the loan in 9 months flat, you’re in control.

Ready to explore a smarter loan option?

Check your loan eligibility in minutes with our instant, paperless FIRSTmoney Personal Loan experience. Get instant funds up to ₹10 lakhs.

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Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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