How to make part payment for a personal loan?

Make part payments for your personal loan and improve your credit score
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Make part payment for your personal loan
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3 min
17-06-2024

What is personal loan part prepayment?

Personal loan part prepayment refers to the process of paying off a portion of your loan before the scheduled repayment dates. This allows borrowers to reduce the outstanding principal amount, which in turn can decrease the total interest payable over the loan tenure. Part prepayment is beneficial for borrowers who have surplus funds and wish to reduce their debt burden without paying off the entire loan. This option provides flexibility and can lead to significant savings on interest costs over time.

How to make personal loan part prepayment online?

  1. Log in to your account: Access your lender's online portal or mobile app.
  2. Navigate to loan section: Find the section related to your personal loan.
  3. Select prepayment option: Choose the part prepayment option from the available menu.
  4. Enter payment details: Specify the amount you wish to prepay.
  5. Confirm payment: Review the details and confirm the payment.
  6. Receive confirmation: Ensure you receive a confirmation receipt or email for your records.

Documents required for making personal loan part prepayment

  1. Loan account statement: To verify your outstanding loan balance.
  2. ID proof: A government-issued identification document.
  3. Address proof: Utility bills or other documents to confirm your address.
  4. Bank statements: Recent bank statements to show the source of funds.
  5. Prepayment form: Some lenders may require you to fill out a prepayment request form.

Pros of personal loan part prepayment

  • Interest savings: Reduces the total interest payable over the loan tenure.
  • Lower monthly EMIs: Can lead to reduced monthly instalments if the loan tenure remains the same.
  • Reduced principal amount: Lowers the outstanding principal, decreasing the overall debt burden.
  • Improved credit score: Demonstrates financial responsibility and can positively impact your credit score.
  • Flexibility: Provides an option to manage surplus funds effectively.

How does personal loan part payment impact your credit score?

Making a personal loan part payment can positively impact your credit score. By reducing the outstanding principal, you lower your overall debt, which improves your credit utilization ratio. This demonstrates to credit bureaus and lenders that you are managing your debt responsibly. Additionally, making part prepayments can show a consistent track record of timely payments and financial discipline, further boosting your creditworthiness. However, it's essential to ensure that the part prepayment does not disrupt your regular EMI payments, as any missed or late payments can have a negative effect on your credit score.

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Frequently asked questions

How does partial payment in personal loan benefit you?

Partial payment on a personal loan can provide several benefits. By making a partial payment, you save money on interest over the loan tenure, as the outstanding principal amount is reduced. This reduction in principal means that future interest calculations will be based on a smaller amount, lowering your overall debt. Additionally, partial payments can help improve your credit score. Consistently reducing your debt demonstrates financial responsibility to lenders, making you more attractive for better interest rates and favourable loan terms in the future. Overall, partial payments can provide immediate financial relief and long-term benefits.

What if I pay my personal loan early?

Paying your personal loan early can be a financially wise decision. Early repayment means you will be charged less interest on the remaining loan amount, leading to significant savings. Once you clear your loan early, not only will you reduce your debt burden, but you will also improve your credit score. An improved credit score can enhance your ability to obtain another loan if necessary, under more favourable terms. The money saved from early repayment can be redirected to meet other financial needs or investments, providing greater financial flexibility and security.

Does personal loan part prepayment reduce interest?

Yes, personal loan part prepayment can reduce the interest you pay over the loan's life. When you make part-payments, you lower the outstanding principal amount, which in turn reduces the interest calculated on the remaining loan balance. This can lead to substantial savings on interest payments. Additionally, full prepayment can significantly boost your credit score, as it demonstrates your ability to manage and repay debt effectively. Importantly, loan pre-closures do not have a negative impact on your credit score; in fact, they can enhance it by showing lenders your financial discipline and responsibility.

How many times can we do part payment?

The number of times you can make part payments on a personal loan depends on the policies of your lender. Some lenders may allow unlimited part payments, while others might impose restrictions on the frequency and amount of such payments. It's important to check your loan agreement or consult with your lender to understand their specific rules regarding part payments. By knowing these terms, you can plan your repayments more effectively and take full advantage of the flexibility offered by part payments to reduce your debt burden and save on interest.

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