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This is one of the least-known rights in Indian digital lending — and one of the most powerful.
Under RBI's Digital Lending Guidelines 2022, every digital loan has a 3-business-day cooling-off period after disbursement. During this window, you can cancel the loan completely — paying back only the principal you received plus pro-rata interest for the days you held it. No penalty. No foreclosure charge. No questions.
In most cases, for a short-tenure loan you cancel on Day 1, this cost is just a few hundred rupees.
Here is how to use this right.
The Exact Regulatory Basis
RBI Digital Lending Guidelines 2022, Paragraph [Cooling Period]: "The RE [Regulated Entity] shall ensure that there is a cooling-off/look-up period during which the borrower can exit the digital loan by paying the principal and the proportionate APR/annualised cost of credit without any penalty for the period the loan was used."
RBI has specified this cooling-off period as 3 business days for most digital loans.
When Would You Want to Cancel?
You borrowed in haste and now realise the APR is far higher than you understood. (SahiSujhav's APR calculator shows the real cost — use it before signing, but if you missed it, use it within 3 days of disbursement.)
You received less than expected because processing fees were deducted upfront, making the loan uneconomic.
You found a better rate from another lender within 3 days.
You resolved the need another way (family support, employer advance) within 3 days of taking the loan.
You discovered the KFS was not provided and realised you didn't have full information when you signed.
How to Calculate Your Cancellation Cost
If you cancel on Day 2: You return: Principal received (not the approved amount — the actual disbursed amount) Plus: 2 days of interest at the APR disclosed in your KFS No additional charges
Example: Loan approved: ₹20,000, processing fee 3% + GST deducted upfront Amount received: ₹18,854 APR: 65% Cancel on Day 2
Cancellation cost calculation: Principal to return: ₹18,854 2 days interest at 65% APR: (65%/365) × 2 × ₹18,854 = ₹67 Total to pay: ₹18,921
You escape a ₹20,000 loan and all future EMIs by paying ₹67.
The Step-by-Step Cancellation Process
Step 1: Confirm the disbursement date (Day 0). Your 3 days run from this date.
Step 2: Calculate the cancellation cost using the formula above or HeyZ AI's calculator.
Step 3: Send a formal written cancellation notice to the lender. This must be in writing — verbal notice is not sufficient:
LOAN CANCELLATION NOTICE
To: [Lender Name] — Customer Service / Nodal Officer Subject: Cancellation of Digital Loan — Account [NUMBER] — Under RBI Cooling-Off Period
Date: [DATE]
Dear Sir/Madam,
I hereby exercise my right to cancel loan account [NUMBER], disbursed on [DISBURSEMENT DATE], under the RBI Digital Lending Guidelines 2022 cooling-off period provision.
I request the calculation of the exact amount payable (principal received + pro-rata interest at the KFS-stated APR for [X] days).
Please confirm the payable amount and payment instructions within 24 hours. I will remit the amount immediately upon receiving this confirmation.
Yours sincerely, [Your Name], [Date], [Contact]
Step 4: Await the lender's confirmation of the payable amount.
Step 5: Pay the amount through official channels. Keep the payment receipt.
Step 6: Request written confirmation that the loan has been cancelled and that CIBIL will be updated to show no loan (or "Closed" if any reporting was done).
If the Lender Refuses to Allow Cancellation
A lender who refuses to honour the cooling-off period is violating an explicit RBI mandate.
Immediate response: File with RBI Sachet citing the specific cooling-off period provision File a complaint with the RBI Ombudsman
The Ombudsman has authority to order the cancellation at the correct cost and may award additional compensation.
HeyZ AI calculates your cooling-off period cost and generates your cancellation notice — free at www.sahisujhav.com
Act within 3 days. Do not wait.
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