How to Save Thousands on Your Loan with Part Payments
One of the most effective ways to reduce your loan burden is by making part payments, also known as prepayments. This guide explains how this powerful strategy works.
What is a Part Payment?
A part payment is an extra payment you make towards your loan, over and above your regular Equated Monthly Installment (EMI). Unlike your EMI, which is a mix of principal and interest, a part payment goes directly towards reducing the outstanding principal amount of your loan.
This is the key to its power: by reducing the principal, you also reduce the amount of future interest calculated on that principal. This has a cascading effect that can save you a significant amount of money and shorten your loan's tenure.
The Two-Fold Benefit of Part Payments
When you make a part payment, you typically get two choices from your lender:
1. Reduce the Loan Tenure
Keep your monthly EMI the same. The extra payment shortens the total number of payments, meaning you pay off the loan much faster.
2. Reduce the EMI
Keep the original loan tenure. The principal reduction allows for a recalculation of a lower EMI for the remaining duration.
While a lower EMI can be tempting, reducing the tenure (Option 1) almost always results in greater overall interest savings. Paying off the loan faster means you pay interest for fewer months.
See the Impact for Yourself
The best way to understand the true impact of a part payment is to see the numbers. How much could you save by making a ₹50,000 part payment one year into your loan? What if you made smaller payments every year?
Guesswork isn't necessary. Our Loan Expert calculator includes a powerful simulation engine that lets you model these exact scenarios.
Simulate Your Savings Now
Go to our calculator, enter your loan details, and use the "Simulate" feature to add part payments. See your interest savings and shortened tenure in real-time.
Go to the Loan Calculator & Simulator