As an example, the EMI for a personal loan of Rs. 2 lakh that is taken out at a 15% interest rate for a tenure of five years is Rs. 4,758. So, at the conclusion of the first year, you would have paid 28,056 in interest and 29,040 toward the principal. You will avoid paying 57,423 in interest if you choose to prepay the entire balance due at this time. Do not forget to ask the lender about prepayment/foreclosure fees.
You can make a half payment if you don’t have enough money to make the full prepayment. Part payments are effective since they lower the loan’s principal, which lowers the interest rate. This in turn can lower your EMI. If you choose a personal loan for Rs. 3 lakh with a duration of five years and an interest rate of 15%, you would have to pay an additional interest of Rs. 1,28,219 for the loan. You may save roughly 30% of your interest share if you made a little part payment of $50,000 after the sixth EMI.
Make sure you proceed with a dependable financial partner as soon as you realise you need a personal loan. There may be loan options available with remarkably cheap interest rates. However, if you read the fine print, you’ll discover that there are other unmentioned fees, such as a processing fee or a significant pre-payment penalty, which apply if you try to pay back the loan early.
In most cases, a personal loan can be repaid in equal monthly instalments (EMI) over a two- to five-year period. Lending institutions carefully examine the profiles of their clients based on variables like income, credit score, age, and salary information because personal loans are not secured by any kind of collateral.