With Hazard due to be a free agent in 2020, Melchiot believes his former club should cash in on the Belgian while they can.
"Keeping him for another year and letting him go for free? That would be bad business," he told talkSPORT on Monday.
"As a fan, all along I want to keep Hazard until the last minute. But as a business, it would not be a smart move to hold onto him.
"You don't want to let anybody walk out for free.
"If you can get a lot of money for him… he's on his last year and still has a value of around £100m. If they can get that for him, it would be great."