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Two wheeler foreclosure process guide

Two-Wheeler Loan Foreclosure Process: A Step-by-Step Guide

Two wheeler foreclosure process guide

From bustling cities to remote villages, two-wheelers have emerged as an integral part of daily life, offering a swift and agile mode of transportation. However, buying a bike right away is quite expensive. Thus, many people prefer taking a bike loan. This allows them to pay the amount in smaller chunks, decreasing the financial burden. There are, however, several factors to consider when the loan amount is to be repaid or foreclosed.

In this blog, we will walk you through the procedure, advantages and everything you need to know for a two-wheeler loan foreclosure.

Key Highlights

  • Two-wheeler loan foreclosure involves visiting the lending institution, submitting the necessary documents, paying off all dues and obtaining closure documents.
  • Foreclosure allows borrowers to repay the loan before the scheduled end date, saving on interest payments.
  • Types of foreclosure include full foreclosure (complete repayment) and partial foreclosure (partial prepayment).
  • Prepaying the loan helps save on interest, eliminates debt and can boost the borrower's credit score.

Definition of Foreclosure

When applying for a two-wheeler loan, borrowers choose a repayment period based on their ability to repay. However, if there is a positive change in income due to factors like promotions or new jobs, borrowers may repay the loan before the scheduled end date.

This early repayment in a single payment is known as two-wheeler loan foreclosure.

Types of Foreclosure

Foreclosure (FC)

Partial Foreclosure (PFC)

Foreclosure is when the borrower pays off the entire loan amount and closes the loan account in one go. It is a complete repayment of the loan.

Partial foreclosure is when the borrower pays some money in advance and settles future loan instalments. This reduces the number of remaining payments based on the partial amount paid.

Prepayment vs Foreclosure



Prepayment is when a borrower pays off a portion of the outstanding loan principal. For example, if the principal is ₹3 lakhs and the borrower pays ₹1 lakh, it is considered partial prepayment.

Foreclosure happens when the borrower repays the entire outstanding principal at once. This results in the complete closure of the loan. If the borrower prepays the total principal outstanding of ₹3 lakhs, it is considered a full prepayment.

Bike Loan Closing Procedure for Two-Wheeler Loan Foreclosure

Step 1: Visit the lending institution

Go to the lending institution’s branch in person and submit the written application to initiate the loan foreclosure.

Step 2: Submit the Necessary Documents

Provide proof of identity, loan agreement papers, loan account details and recent bank statements showing cleared payments.

Step 3: Paying Off All the Dues

The borrower must pay all the remaining dues to foreclose a two-wheeler loan. This includes the outstanding amount, accrued interest, and the foreclosure charges for a two-wheeler loan.

After paying all the dues, they will receive a "No Dues" certificate from the lending institution.

Step 4: Clearing Lien and Requesting Legal Clearance Certificate

When applying for a loan, the lending institution puts a hold on your vehicle by registering documents. This hold is called a lien. When closing the loan, the borrower must inform the lending institution to remove this lien from the records. As an additional measure of protection, legal clearance can be obtained from a legal advisor.

After removing the lien, getting an Encumbrance Certificate (EC) is also important. It verifies that there are no other claims or liabilities on your two-wheeler.

Step 5: Collect All the Documents

After repaying the loan:

  • Ensure you receive the lender's NOC (No Objection Certificate) and clearance letter.
  • Check that all your original documents, like two-wheeler papers, are returned.
  • Request a final loan statement containing important details like dates, amount and EMI payments.

Advantages of Foreclosure or Prepayment

  • Save on Interest: Prepaying the loan allows borrowers to save on significant interest costs, especially for loans with high interest rates. Get a Shriram Two-Wheeler Loan with low interest rates starting from 11.5%* p.a.
  • Eliminate Debt: Prepayment or loan foreclosure removes the borrower's debt entirely, relieving them of any external liabilities.
  • Boost Credit Score: Prepaying the loan can positively impact the borrower's credit report, potentially increasing their credit score.
  • Dos and Don'ts


  • Before applying for the loan, check if you can initiate the foreclosure process and be aware of the two-wheeler loan foreclosure
  • It is important to inform the RTO (Regional Transport Office) about the closure of the loan to remove the hypothecation on your two-wheeler.


  • Avoid applying for foreclosure without inquiring about the foreclosure charges. Shriram Finance two-wheeler loan foreclosure charges start from 4%*, depending on the loan amount.
  • If the loan tenure is about to end within a few months, opting for foreclosure may not be necessary.
  • Consider the repayment schedule and the remaining principal amount before deciding on a two-wheeler loan foreclosure.

How to Foreclose Your Shriram Finance Two-Wheeler Loan?

The two-wheeler loan foreclosure procedure is very simple with Shriram Finance.

Step 1: Visit the Branch

Step 2: Submit a Written Application

Step 3: Submit the Necessary Documents

Step 4: Pay the Required Amount

Step 5: Receive Closing Documents

Is There a Charge for Loan Foreclosure?

The two-wheeler loan foreclosure charges depend on the remaining tenure and the outstanding principal amount. The two-wheeler loan foreclosure charges typically range from 3% to 6%, depending on the loan amount.

To Sum Up

Getting out of debt faster seems quite ideal, but only when you understand the process entirely. Understand the difference between prepayments and foreclosure charges for two-wheeler loans and weigh the pros and cons of both before taking a call.

With Shriram Finance, foreclosing your loan is a simple process that can be completed in five steps. Get Shriram Two-Wheeler Loan with interest rates starting from 11.5%* p.a.


1. What documents are required for foreclosure of a two-wheeler loan?

The required documents include proof of identity, loan agreement, account details and bank statements.

2. How to foreclose a two-wheeler loan?

Visit the lender's branch, submit a written application, provide the necessary documents, make the payment and receive the closing documents.

3. How is the foreclosure amount calculated for a two-wheeler loan?

The two-wheeler loan foreclosure calculation is based on the outstanding principal, remaining tenure and applicable foreclosure charges.

4. Can a bike loan be foreclosed?

Yes, a bike loan can be foreclosed by following the lending institution’s process and considering any applicable charges.

5. Why consider partial foreclosure?

Partial foreclosure enables borrowers to pay off a portion of the loan before the scheduled end date, reducing the overall debt and potentially saving on interest payments.

Get a two wheeler loan at low interest rates