Home Loan Calculator: How 10% prepayment of principal amount can save Rs 35.11 lakh and 5 years and 8 months on Rs 70 lakh, 25-year loan
Home Loan Calculator: Prepayment is an effective way to reduce interest rate and tenure on a home loan. The timing of prepayment is important as making it early helps one save more money on interest than saved when they delay it.
Home Loan Calculator: Home loans are for long durations, so it is very obvious for a borrower to repay a higher interest amount than the principal. The longer the duration, the higher the interest amount. In 30-year-long home loans, it can be more than twice the principal. Such a large interest may pose a huge psychological burden on the borrower as they need to maintain the continuous income flow for a long time to repay the equated monthly instalment (EMI) on time. However, there are ways through which they can not only decrease the interest amount but also cut down on loan tenure.
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(Disclaimer: This is not financial advice. Do your own due diligence or consult an advisor for financial planning.)
How to reduce interest amount
How to reduce loan tenure
When one uses the option of prepayment, the lender gives them two options- either they can reduce their EMI amount, or they can keep the EMI amount the same and reduce tenure. If they reduce their EMI amount, the interest will decrease, but the loan tenure will remain the same. If they go for the same EMI, the interest amount and the loan tenure will both reduce.