Difference between part payment and prepayment

When managing a loan, borrowers often look for ways to reduce their debt burden before the tenure ends. Two common methods to achieve this are prepayment and part-payment. Understanding the difference between these options can help you save significantly on interest and shorten your repayment period. Prepayment involves clearing off the entire outstanding loan amount ahead of schedule, thereby eliminating future interest payments. On the other hand, part-payment refers to paying a portion of the principal amount, which reduces the overall loan balance and lowers the interest you pay in subsequent EMIs. Both options offer financial benefits but are suited for different borrower needs. Knowing when to opt for part prepayment or full prepayment will help you manage your loan efficiently via the customer portal.

What is part-payment in loan?

Part-payment in a loan refers to the process of paying an additional portion of the loan's principal amount, over and above your regular EMIs. When you make a loan part prepayment, it reduces the outstanding loan amount, which in turn lowers the total interest you’ll have to pay moving forward. This method can also help reduce the monthly EMIs or shorten the overall loan tenure, depending on the terms agreed upon with your lender. Part-payment is typically made when borrowers have extra funds, such as a bonus or savings, that they wish to use to reduce their loan burden without fully paying off the loan. It’s a flexible option for borrowers who want to manage their debt more effectively without completely clearing the loan.

What is prepayment in loan?

Prepayment in a loan refers to repaying the entire outstanding loan amount before the scheduled tenure. This process allows borrowers to completely pay off the loan, eliminating the need for future EMI payments and associated interest costs. Prepayment can be an excellent option for borrowers who have accumulated enough funds to clear their loan balance in one go. However, some lenders may impose prepayment charges, so it’s important to check the terms and conditions before proceeding. By choosing prepayment, borrowers can significantly reduce their financial obligations and focus on other investments or savings. You can easily request prepayment via the customer portal.

Difference between part-payment and prepayment of a loan

Criteria	Part-Payment	Prepayment
Definition	Paying a portion of the principal amount, over and above the regular EMIs.	Paying off the entire outstanding loan amount before the tenure ends.
Effect on EMI	Can reduce the EMI amount or shorten the loan tenure.	Completely eliminates the EMI payments.
Impact on Interest	Lowers the interest burden by reducing the outstanding principal.	Eliminates all future interest payments, as the loan is fully paid off.
When to Use	Ideal for borrowers with extra funds who want to reduce their loan burden gradually.	Ideal for borrowers with enough funds to fully clear the loan and avoid paying further interest.
Associated Costs	Some lenders may charge a nominal fee for part-payments.	Prepayment may involve charges depending on the lender’s terms.
Process	Can be done via loan part prepayment.	Can be initiated through the customer portal for full repayment.

Both part-payment and prepayment offer borrowers flexible ways to manage and reduce their loan burden. While part-payment allows you to gradually reduce your principal and interest, prepayment helps you eliminate the loan entirely. Whether you have extra funds to make part prepayment or clear the loan in full, choosing the right option depends on your financial situation.

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