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How to Reduce Your Home Loan Amount with Prepayment
Home loans can feel like a long journey to pay loan EMIs, but there’s a smart way to lighten the load — prepayment. When you pay a little extra over your regular EMI (either as a lump sum or in parts), it goes straight to reduce your principal amount.
This means less interest over time and a shorter loan tenure. Even small prepayments made early in the loan period can save you lakhs in interest.
📊 Quick Example:
Suppose you took a home loan of ₹40 lakhs for 20 years at 8.5% interest.
Your EMI will be around ₹34,677, and total interest payable over 20 years would be about ₹43.2 lakhs.
Now, if you make a lump sum prepayment of ₹5 lakhs in the 3rd year:
- Your principal drops to ₹35 lakhs
- You could save ₹10–12 lakhs in interest
- And reduce your loan term by around 4–5 years (if you keep the same EMI)
Even periodic small prepayments like ₹50,000 once a year can lead to big savings over time.
Most banks allow partial or full prepayments without extra charges (especially for floating-rate loans), so take advantage of any extra funds — bonuses, tax refunds, or matured investments. Better to avail a home loan which has NIL prepayment charges and should also have a option to pre pay in part or in full.
Prepaying your home loan is a smart, stress-free way to save money and become debt-free faster.
