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What is fore closure fee?

This is a fee charged, if Loan is closed before the agreed period. If the bank and borrower have agreed for a repayment period of five years, and contrary to such agreement, the borrower prefers to close the Loan account at the end of two years, the bank imposes some penalty to compensate for the loss of interest. Such penalty is called for-closure fee which is generally 1% of the outstanding Loan.