Digital loans move fast. You can go from an app download to money in your account in under an hour, which is exactly why the RBI built in an exit. If you took a loan in a hurry, found a cheaper option the next morning, or realised the EMI won’t fit, the cooling-off period lets you walk away cleanly. It is one of the rights in our borrower rights checklist for India.
What the rule says
The RBI’s Digital Lending Directions, 2025, issued on 8 May 2025, apply to loans that banks and NBFCs give through digital channels, including their own apps and lending service providers’ apps. On the cooling-off period, the essentials are:
- Who decides the length: the lender’s board, subject to the one-day minimum.
- What you pay to exit: the principal and the proportionate annual percentage rate (APR), meaning the cost for the days you held the money.
- What you don’t pay: any penalty for prepayment.
- What the lender may keep: a reasonable one-time processing fee, but only if it was disclosed in the KFS.
Before 2025, the 2022 guidelines also referred the length to the lender’s board, with a floor of three days for loans of seven days or more and one day for shorter loans. Check your own KFS: some lenders still give more than the minimum.
What exiting actually costs: a worked example
Take an illustrative ₹1,00,000 loan for 12 months at an APR of 18% a year, with a processing fee of 3% plus GST shown in the KFS.
| Exit option | Interest for the days held | Processing fee |
|---|---|---|
| Exit on day 1 (in the cooling-off window) | about ₹49 | ₹3,540 may be kept if disclosed |
| Exit on day 3 (if your window is 3 days) | about ₹148 | ₹3,540 may be kept if disclosed |
| Prepay after 6 EMIs | ₹7,239 already paid | Already paid; foreclosure terms apply |
| Keep the loan to the end | ₹10,016 in total | Already paid |
Interest paid on an illustrative ₹1 lakh, 12-month loan at 18%
Illustrative. Assumes 18% a year on a reducing balance, EMI ₹9,168, simple daily interest during the cooling-off window, and a 3% processing fee plus 18% GST (₹3,540) disclosed in the KFS. Your lender’s KFS shows your actual APR, fee and cooling-off period.
Within the window, the cost of changing your mind is a few days’ interest, not a penalty.
The fee is the real cost of a regretted loan, which is why it pays to read the KFS before you accept, not after. Our explainer on reading a Key Fact Statement shows where each number sits.
When it makes sense to use it
Good reasons to exit
- The APR in the KFS is far higher than you understood.
- You found a cheaper regulated lender.
- The emergency resolved itself and you don’t need the money.
- The EMI won’t fit your take-home pay.
Think twice if…
- You’ve already spent the money; you’ll need it back in full.
- You plan to borrow the same amount elsewhere at a similar cost.
- The issue is a recovery or service problem; that’s a complaint, not an exit.
How to exit a digital loan in the cooling-off window
Use the cooling-off request in our borrower letter templates if you’d like a ready format. A month later, check your credit report to make sure the loan shows as closed. Closed loans are reported to bureaus like any other, so the account will appear in your history, closed in good standing.
If the lender won’t let you exit
Signs of trouble: no cooling-off period in the KFS, a “foreclosure charge” demanded inside the window, a fee that wasn’t disclosed, or no way to repay. Write to the lender’s grievance redressal officer, keep screenshots, and if it isn’t resolved within 30 days, escalate to the RBI. Our step-by-step complaint guide covers the 2026 Ombudsman rules.
If the app has no bank or NBFC behind it, the RBI’s rules won’t help you exit. Check the app first with our RBI app check guide, and see what short-term app loans really cost with the loan app cost calculator.
After the window: prepayment
Once the cooling-off period ends, you can still repay early, but the loan agreement’s prepayment or foreclosure terms apply. For personal loans these vary by lender and by whether the rate is fixed or floating. Our guide to your loan prepayment and foreclosure rights explains what lenders can and cannot charge.
Know the full cost before you sign
Omozing personal loans for salaried people start from 11% a year. Your KFS shows the exact rate, fee, APR and cooling-off period before you accept.
Frequently asked questions
What is the cooling-off period on a digital loan?
It is a window after disbursal when you can exit a digital loan by repaying the principal and the proportionate cost, without a prepayment penalty. Under the RBI’s Digital Lending Directions, 2025, it must be at least one day and is set by the lender’s board.
Is the cooling-off period three days?
Not necessarily. The 2025 Directions set a minimum of one day and let each lender’s board decide the length. Some lenders give longer. Your Key Fact Statement states the exact period for your loan.
Do I get my processing fee back if I exit?
Not always. The lender may keep a reasonable one-time processing fee if it was disclosed in the Key Fact Statement. It cannot charge a prepayment penalty or fees not shown in the KFS.
Does exiting in the cooling-off period affect my CIBIL score?
The loan is reported and then shown as closed, so it appears in your history. A loan repaid on time doesn’t count as a default. The credit enquiry made when you applied also stays on your report.
Does the cooling-off period apply to loans from unregistered apps?
No. It applies to digital loans from RBI-regulated banks and NBFCs. Apps with no regulated lender behind them are outside the rules; report them on the RBI’s Sachet portal.
What if the lender refuses to let me exit?
Complain in writing to the lender’s grievance redressal officer. If it isn’t resolved in 30 days, file with the RBI on cms.rbi.org.in.
Sources (checked October 2026): RBI (Digital Lending) Directions, 2025 (8 May 2025), cooling-off/look-up period provisions; RBI Guidelines on Digital Lending (2 September 2022). General information, not legal advice.
Omozing is the digital lending brand of Aparampaar Finance Private Limited, an RBI-registered non-deposit-taking NBFC. See our regulatory disclosures and grievance redressal process.