You have received a performance bonus and are thinking about pre-closing your personal loan. Before you transfer the money, run through this framework — because whether pre-closure makes financial sense depends on several factors that most people do not check.

The Interest Saving Calculation

Remaining interest is the amount you will pay in EMIs from today until the loan ends, minus the principal component. To calculate it, look at your loan amortisation schedule (available in your lender's app) and sum the interest portions of all remaining EMIs. This is the maximum you can save by pre-closing today.

Example: ₹2,00,000 loan, 24% p.a., 36 months — 12 months paid. Remaining interest = approximately ₹28,000. Pre-closure charge at 2% of outstanding ₹1,40,000 = ₹2,800 + GST. Net saving = approximately ₹24,700. Worth it if you have the funds and no better use for them.

The Opportunity Cost Test

Before pre-closing, ask: what else could you do with this money? If you have outstanding credit card debt at 40% p.a., paying that off first saves more money than closing a 22% personal loan. If you have no emergency fund (3–6 months of expenses), building that is a higher priority — a sudden job loss or medical emergency is more expensive than loan interest. If your loan interest rate is below the returns you are earning on investments, the math may favour keeping the loan.

Pre-Closure Charges

At Crestmont Capital, pre-closure charges are: Nil within the 3-day cooling-off period, 4% of outstanding principal within the first 3 months, 2% between 3–12 months, and Nil after 12 months. This means the optimal pre-closure window — if you have the funds — is after completing 12 monthly EMIs, when no charge applies.

Credit Score Impact

Pre-closing a loan improves your debt-to-income ratio immediately (fewer obligations relative to income) and removes an active loan from your credit report. Both are positive. However, "loan mix" — having a healthy variety of credit types — is a small component of your credit score. If this personal loan is your only active credit account, closing it may slightly reduce your score in the short term.

The Decision Framework

Pre-close if: you are past the 12-month mark (no charges), the interest saving exceeds the pre-closure cost, you have adequate emergency savings, and you have no higher-rate debt. Hold if: you are within the first 3 months, you lack an emergency fund, or there is a better use for the capital.