Smart management of a home loan is as crucial as selecting a good lender. For the borrower, the loan amount and repayment period extend over many years, which may at times seem suffocating. However, techniques such as part payment and prepayment can significantly reduce your expenses over time.
Knowing which of these works best for your case can lead to lakhs of rupees in savings on interest and make you debt-free earlier. Let us understand the difference between part payment and prepayment, their advantages, and how to go about choosing the best solution for your requirements.
What is Prepayment of a Home Loan?
Prepayment is when you pay back your home loan amount in its entirety prior to the end of the original loan term. In other words, you settle your pending loan by paying a lump sum against the outstanding principal and interest.
For example, if you have a ₹30 lakh home loan for 20 years and you choose to repay the whole outstanding amount after 10 years, that is prepayment. After the prepayment of the loan, you are out of EMIs and interest payments.
Major advantages of prepayment:
- Total freedom from debt – You don’t have a home loan liability anymore.
- Enormous savings of interest – You save interest for the remaining period.
- Better credit rating – Early closure of the loan improves your credit report.
Prepayment is costly, though. Not everyone possesses liquidity in the form of money to pay the entire remaining outstanding amount.
What is Part Payment of a Home Loan?
Part payment, in contrast, is when you pay back a part of your home loan alongside your normal EMIs. In contrast to prepayment, the loan is not closed, but the additional payment is offset against the outstanding principal alone, which lessens the amount of the loan and then reduces the burden of interest.
For instance, if your outstanding loan is ₹20 lakh and you make a single part payment of ₹3 lakh, your principal becomes ₹17 lakh. This reduces your future interest payments directly.
Major advantages of part payment:
- Reduced EMIs or lower tenure – Depending on the policy of your lender, part payment can lower either your EMI or loan tenure.
- Flexibility – You can make part payments as and when you have excess funds.
- Interest savings – Even small, frequent part payments can save you lakhs in the long run.
Prepayment vs. Part Payment: What’s the Difference?
While both strategies reduce your home loan burden, they work differently. Here’s a quick comparison:
| Aspect | Prepayment | Part Payment |
| Definition | Repaying the entire loan before the tenure ends | Paying an extra lump sum over regular EMIs |
| Loan status | The loan is closed completely | Loan continues but with reduced outstanding |
| Financial requirement | Large lump sum required | Flexible, smaller payments are possible |
| Interest savings | Maximum, since no future interest is payable | Significant, as the principal reduces early |
| Ideal for | Those with enough funds to close a loan | Those who get periodic surplus income |
What is the Best Approach for You?
The option between prepayment and part payment is based on your financial standing, long-term goals, and liquidity comfort.
Opt for prepayment if:
- You can pay the entire loan amount from your resources.
- You want to wipe out debt entirely and have peace of mind.
- You are nearing retirement age and want to cut down on financial burdens.
Opt for part payment if:
- You get occasional incentives, rentals, or bonuses.
- You wish to maintain liquidity but still cut your EMI burden.
- You desire flexibility and long-term savings without draining your savings.
Use a Home Loan Eligibility Calculator Before Making a Choice
Before making a decision between prepayment or part payment, it’s essential to determine your repayment capacity. That is where a home loan eligibility calculator comes in handy.
A home loan eligibility calculator makes you aware of:
- How much loan are you eligible for, depending on your income, age, and liabilities?
- The likely EMI pattern for various tenures.
- The effect of prepayment or partial payment on your repayment schedule.
With this tool, you can strategize whether it is worthwhile to settle your loan completely or pay it down over time without compromising your finances.
Smart Tips to Lessen Your Home Loan Burden
Other than part payment and prepayment, the following strategies can be employed as well:
- Choose shorter tenure: Shorter tenure involves larger EMIs but a much lower interest payout.
- Raise EMI with income rise: If your income rises, you can raise your EMI accordingly.
- Select balance transfer carefully: In case another lender charges a lower interest, a balance transfer can help save interest.
- Plan your budget: Part payments should not cut into your emergency savings or long-term investments.
Why Choose Grihum Housing Finance?
In managing a home loan, everything matters with the right partner. Grihum Housing Finance appreciates the special financial requirements of borrowers and offers flexible repayment terms to help you lower your loan burden efficiently.
Whether you opt for full prepayment or periodic part payments, Grihum Housing Finance has customer-friendly policies to help you save on interest and pay off the loan faster. The company also has a home loan eligibility calculator to enable you to easily plan your lending and repayment schedule.
Conclusion
Both part payment and prepayment are helpful options to decrease your home loan burden. Prepayment provides you with absolute financial independence by closing the loan account, whereas part payment gives you flexibility to save interest and still go on with your EMIs. The correct option is dependent upon your present financial status, long-term objectives, and risk tolerance.
With Grihum Housing Finance’s help and guidance, you can make wise choices and handle your home loan intelligently. With the help of tools such as the home loan eligibility calculator, you can plan your repayments in a better way, cut down on interest outgo, and see your dream of a debt-free home quickly.
