Paying off a loan before its scheduled end date. Also refers to a lender seizing property when a borrower defaults. For home loans, RBI has banned foreclosure charges on floating-rate loans for individual borrowers since 2012.
You have a home loan at 9% for 20 years. After 5 years, you get a bonus and want to close the loan. Since it's a floating-rate loan, the bank CANNOT charge any foreclosure penalty — this is an RBI rule. For fixed-rate loans, banks may charge up to 2%.
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