Prepayment: reduce the EMI or reduce the tenure?
Both feel like progress. Only one meaningfully cuts your interest outgo.
4 min read
What you need to know
When you make a lump-sum prepayment, most lenders default to reducing the EMI and keeping the tenure. Keeping the EMI and cutting the tenure saves substantially more interest, because interest accrues on the outstanding for fewer months.
On a ₹50 lakh, 20-year loan at 8.6%, a ₹5 lakh prepayment in year three saves roughly ₹13 lakh in interest if you shorten the tenure, against roughly ₹8 lakh if you lower the EMI. Ask for tenure reduction in writing — it is usually not the default.
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Frequently asked questions
What is the main takeaway from “Prepayment: reduce the EMI or reduce the tenure?”?
Both feel like progress. Only one meaningfully cuts your interest outgo.
What should I check before acting on this home loans guide?
Review the practical points in the guide against your income, obligations, documents and lender requirements.
Can the information in this guide guarantee loan approval?
No. It is general educational information. A bank or NBFC makes the final decision after checking your credit profile, repayment capacity, documents and the applicable product policy.
How can iFINTRUST help after I read this guide?
An iFINTRUST advisor can review your requirement, explain the documents normally requested and help you compare suitable lending options before you apply.