Benefits of Personal Loan Pre/Part Payments

Benefits of Personal Loan Pre/Part Payments

A personal loan part payment can be availed when an existing loan borrower has a lump sum amount of idle money, which is not equivalent of the principal outstanding loan amount(balance). The part payment is one of the best ways to bring down your principal outstanding, which in turn reduces EMIs and the total interest you pay to the lender.  A borrower can avail a personal loan part payment after 6,9 or 12 months of loan repayments (varies from lender to lender) and also the amount of part payment either be the (multiple of EMI or % of principal outstanding). Not all banks and NBFCs allow personal loan part payments and those which do, levy certain charges on the same. Be a smart borrower and avoid part payment if you have a small lump sum as it creates a negligible effect on your EMIs and also makes you bear the related charges.

What is Personal Loan Part Payment?

A personal loan part payment is one such facility, wherein an existing loan borrower can repay a part of the principal loan amount, which help in reducing the EMI along with the total interest. Personal loan part payment is beneficial if you have a bigger chunk of the amount available at your disposal. Yes, a good sum helps in reducing your loan repayment burden by bringing down your principal outstanding significantly, thus gives you a big relief. An existing loan borrower can avail this facility after 6, 9 or 12 months of repaying his EMIs. However, not many banks and NBFCs offer part payment facility and those who do, levy a certain charge on the same.

How Can Do Personal Loan Part Payments? 

The process of personal loan part payments is really easy and quick. An existing borrower needs to inform his/her respective lender in a written format to avail this facility. Once you receive a yes from your lender, you can proceed ahead with the process. It all starts when you repay a bigger portion of your outstanding loan balance(principal amount) that will also help in reducing your monthly installment burden. Both salaried and self-employed individuals are eligible to reap the maximum benefits of this facility.  

Personal Loan Part Payment is Good or Not?


Of course, personal loan part payment is good and that too in many ways. When a borrower opts for the same, it not only helps in reducing the principal outstanding, which lowers the interest burden. But personal loan part payment has a lot to do with your EMIs and tenure. Yes, after opting for the same, the overall loan burden of a borrower can ultimately be reduced, which leads to easy EMIs. Also, a borrower can have flexibility with respect to tenures,i.e choose a loan repayment schedule by keeping the EMIs pocket-friendly. After part payment, a borrower can choose the loan repayment tenure according to his pocket, i.e. he/she can increase or decrease the loan tenure as per the convenience.

Top 3 Benefits of Personal Loan Part Payments

1.Reduced Principal and Interest: One of the top benefits of personal loan part payment is reduced outstanding loan amount, also result in lowering the interest paid on your loan. A good amount of lump sum can drastically bring down your principal payment, which means a borrower has less liability towards his/her existing lender. Yes, the part payment amount directly gets deducted from your Principal Outstanding as on date/month of making partial payments.  

Let’s understand this with the help of an example below:
Suppose, you have taken a loan amount of Rs.3,00,000 for a tenure of 5 years at an interest rate of 15%, and you have a lump sum amount of Rs.50,000 to pay. Then let’s just see the see a comparison of pre and post scenario of personal loan part payments.

ParticularsPart Payment RepaymentNormal Personal Loan Repayment
Loan AmountRs.3,00,000Rs.3,00,000
Rate of Interest 15%15%
Tenure5 Years5 Years
Part Payment (9th Month)Rs.50,000Nil
Outstanding Loan Amount after repaying 9 EMIs=Rs.2,64,160 for the Next 4.3 Remaining Years(60-9=51 months)
Loan Amount after Part PaymentRs.2,64,160-50,000= Rs.2,14,160 (remaining loan balance to be paid)Nil
Total Interest Paid Rs.76,760(4.3 years)Rs.12,8,219(5 years)
Savings on InterestRs.12,8,219-76,760=Rs.51,459
Total Interest Percentage26% of the loan amount30% of the loan amount
Interest Saved                     4%

2.Pocket-friendly and Huge Saving on EMIs: Reduced principal outstanding means easy EMIs.Yes, personal loan part payment allows you to have affordable EMIs, as the bigger portion of your principal loan amount has already been paid. With pocket-friendly monthly installments, you can have less loan repayment burden, which means minor chances of personal loan default. 

Let’s have more clarity by looking at the table below.

Below is a table showing reduction and Savings on EMIs  

ParticularsPart Payment RepaymentNormal Personal Loan Repayment
Loan AmountRs.3,00,000Rs.3,00,000
Rate of Interest 15%15%
Tenure5 Years (60 months)5 Years (60 months)
Monthly EMIsRs.7,137Rs.7,137
Part Payment (After 9th Month)Rs.50,000Nil
Outstanding Loan Amount after repaying 9 EMIs=Rs.2,64,160 for the Next 4.3 Remaining Years(60-9=51 months)
Remaining Loan Amount after Part PaymentRs.2,64,160-50,000= Rs.2,14,160Nil
New EMI After Part PaymentRs.5,704Nil
Yearly EMIsRs.5,704×12=Rs.68,448Rs.7,137×12=Rs.85,644
EMI SavingsRs.85,644-68,448= Rs.17,196

3.Fewer Chances of Loan Default: With affordable EMIs comes lesser chances of personal loan default. If a borrower has a pocket-friendly EMIs, there would be no problem in repaying the loan, which simply leads to fewer chances of default. And, lesser default possibilities and the timely loan repayment will ultimately boost your cibil score, making your credit profile healthy in front of the lenders. Yes, your cibil score will improve with the same and your credit profile looks promising to the lender for future borrowings. 

Quick Tip: There are some banks and NBFCs that offer personal loan part payment more than once. Yes, a borrower can opt for part payment of more than one time. Also, there are a lot of conditions attached to the same. Thus, it is advisable to check the same with your respective lender to reap the maximum benefits of the same.  

So, hope this insight on personal loan part payment would be useful and will help you to save on your existing loan. 

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