Part-Payment Vs Prepayment Vs Pre-Closure? Check Out the Differences

In India, many people take up a personal loan to finance their dreams of owning their own houses, holding lavish weddings, completing their graduation programs, or traveling with their families. Many also opt for a personal loan to tend to medical emergency situations or pay off existing debt. Taking up a loan involves repaying it with an additional cost of borrowing or interest. All in all, you repay an amount greater than what you borrowed in the first place.

What is Part-Payment?

When you choose the part-payment feature for repaying your loan, you opt for saving a major chunk of repayment money. Part-payment means that you wish to give back to the lending institution a significant amount of loan money at once. This amount is less than what you borrowed but is considerable enough to cut down your interest and EMI payment.

What is Prepayment?

The act of repaying the entire amount you borrowed from the lending institution well before the actual tenure of the loan is completed is known as prepayment. For example, suppose that you have taken up a personal loan of INR 2,50,000 for a tenure of 3 years for a personal investment, at an interest rate of 12%.

According to this online EMI calculator, your total payable funds amount to INR 2,98,886 at the end of 3 years.

Let us say, this investment that you made gave you higher returns than you expected it to within 20 months. At the end of 20 months, your current loan is at a principal outstanding of INR 1,22,210 and you have repaid a total of INR 1,291 as interest and INR 7,011 as principal.

Because of your investment gains, if you are financially capable of producing all remaining loan repayment amounts (INR 1,22,210) at the end of these 20 months, then you can become debt-free. When you give this amount back to the lending institution, you will not owe anything more to the firm and can be freed from paying additional interest or EMIs.

Conclusion

Once you understand part-payment vs prepayment vs pre-closure, deciding how to repay your loan will become easy. If you are looking to take up a personal loan, you can apply for Fullerton India Credit’s instant personal loan online. Make the most of this financial support!

source url: https://www.smfgindiacredit.com/knowledge-center/part-payment-vs-prepayment-vs-pre-closure.aspx