How does part prepayment affect home loans?

Prepayment and part-payment of home loans can benefit borrowers in multiple ways. When you make lump sum payments over and above the EMI, more of the amount goes towards the principal. This helps shorten the loan tenure and reduces the total interest outgo.

For instance, if you prepay ₹1 lakh on a loan of ₹50 lakhs with 15 years remaining maturity, your loan tenure can decrease by almost 1 year. Additionally, making part-payments can lower your EMIs if the extra amount is used to adjust future instalments. This provides some liquidity in case of temporary cash flow issues.

However, charges may apply if pre-payment exceeds annual limits set by the loan provider. There could also be processing delays of 7-10 days for the pre-payment to reflect on your loan account.