Prepayment And Part Payment of Personal Loan: Benefits

Prepayment of Personal Loan:

Prepayment is a kind of a facility offered by almost all the lenders when you avail a personal loan. Prepayment means paying your full loan amount before the expiry of the loan’s due date, thereby reducing the burden of EMIs on your loan otherwise it would have continued for a long duration. However, before opting for this facility one may know the pros and cons of it and what benefit it does it offers to you.

For example:

Consider that you have taken a personal loan of Rs. 2 lakh at 15% rate of interest for a term of 5 years i.e. (60 months), then, in this case, your monthly EMI comes to be Rs. 4,758. After the end of the first year, the borrower would have paid Rs. 29,039 towards the premium and Rs. 28,057 as interest. In case the borrower decides to prepay the full loan amount, he would have to pay Rs. 57,422 less in the form of interest.


  1. Prepayment on your personal loan helps one to reduce the burden of EMIs on your loan.
  2. It helps increase your CIBIL score by timely paying your loan EMIs that build up your credit score.
  3. It saves a lot of money in the form of interest on your loan.

Part payment of Personal Loan:

You can consider part paying your personal loan when you are left with some idle sum of cash but which is not equal to the outstanding amount to repay your full loan amount. Making a part payment on your personal loan will help one reduce his monthly EMI outgo and also lower the amount you pay towards interest. However, making a very small part payment towards your personal loan does not help.

For example:

Suppose you have a taken a personal loan of Rs. 3 lakhs at an interest of 15% for a tenure of 5 years (60 months). And, after some time you decide to you make a part prepayment of Rs. 50,000 after 6th EMI, then you would be saving Rs. 40,820 i.e. 32% savings in the interest on your loan.

Also Read:  Pros and Cons of Personal Loan Balance Transfer


  1. It helps brings your outstanding principal amount.
  2. It decreases the number of EMIs on your personal loan.
  3. It helps to decrease the tenure of your loan thereby reducing your stress of paying back the loan.

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