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Things to Know about Personal Loan Prepayment

There are a lot of terms around loans such as personal loan EMI calculator, repayment tenure, and personal loan interest rates. One such term that you will come across when getting a personal loan is known as personal loan prepayment. Here’s a short guide to understanding the basics of personal loan prepayment.

What is personal loan prepayment?

When you opt for a loan, you pay interest on your loan amount each year your payments get carried forward. Personal loan interest rates vary and you can always be prepared for your monthly dues by using a personal loan EMI calculator. However, some borrowers prefer to avoid interest costs and wish to pay their loan amounts before their tenure is complete. This is known as personal loan prepayment. Prepayment can be full or partial.

Advantages and Disadvantages of Prepayment:

The fundamental advantage of the personal loan prepayment of loans is that it helps a customer save a lot of interest. Personal loan interest rates can vary from anywhere between 10% to 12% per annum. Your personal loan EMI calculator will reveal how much your EMIs will cost you each month with this interest accounted for. You can cut down this total EMI cost if you choose to opt for full personal loan prepayment. This advantage is also applicable when you partially prepay your loans. However, keep in mind that partial prepayment is only valid if you prepay a significant amount in advance.

If you partially prepay a small amount, this could not work in your favor. One of the key things to remember about prepayment is that, in certain cases, charges are levied. This is not for every prepayment. However, when your prepayment is above a certain percentage of the principal amount, a charge is commonly levied in addition to GST. The amount of money you save by prepaying your loan is likely going to be much more than this charge.


Once you understand the advantages and disadvantages, you need to be aware of the terms and conditions of prepayment as well. There are certain terms and conditions for personal loan prepayment. In some cases, a part prepayment is not allowed until 6 months after the loan has been disbursed. For certain providers, partial prepayment can only be done once a year. Two payments should be spaced out by six months. There can also be a limit on the amount partially prepaid. You can check your personal loan EMI calculator to learn how much your EMIs will reduce if you were to partially pay your personal loan.

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