What is foreclosure of a loan?
Closing a loan by paying the whole outstanding early.
Closing a loan by paying the entire outstanding before maturity. Distinct from part payment, which reduces the outstanding without closing the account — a distinction worth keeping, because the two are treated differently both in the schedule and in the rules about what may be charged.
Why does foreclosure matter?
Foreclosure is where a lender's contract meets a regulatory limit, and where a system that leaves the decision to whoever configured the scheme will eventually levy a charge it was not entitled to.
What the regulations say about foreclosure
Whether a charge may be levied on foreclosure or part payment turns on the rate type, the borrower's constitution and the purpose of the loan. The 2025 Directions have two limbs that must be read separately: one binds every lender, the other names entity classes and omits the Base Layer.
What a lending system has to do about foreclosure
The statutory bar is applied by the system rather than by the scheme configuration, and a foreclosure quotation is generated as its own document so the figure the borrower is given is the figure the account settles at.
Related terms
- Prepayment — Paying off part of a loan early, without closing it.
- KFS (Key Facts Statement) — A standard-format summary of what a loan actually costs.
- LTV (loan to value) — The loan as a percentage of the security's value.
From the people who wrote this
Run your lending on Lenviq
The section above describes what a lending system has to do about this term. Lenviq does it — on every account, computed at day-end, with the direction it comes from recorded against it.
Lenviq is loan origination, servicing and accounting for NBFCs, built by FastLegal Technologies.