A personal loan is a crucial financial tool that helps individuals fulfil their emergency fund requirements. When taking a personal loan, the borrower commits to repay the loan amount in a fixed tenure. However, for many, repayment seems to be a long journey. Today, top personal loan providers offer attractive loan features like a prepayment facility, allowing borrowers to make small payments to reduce their debt and save on interest.

What is a Partial Prepayment?

A partial prepayment is a smart strategy to lower the overall loan amount by making a financial contribution towards the loan’s principal. It is in addition to the regular equated monthly instalment (EMI). The prepayment of a certain amount ensures it lowers the outstanding principal. It may result in lower EMIs in future or shorter loan tenure, making one debt-free sooner than later.

Top Benefits of a Partial Prepayment

Eases the Loan Burden

When a person makes a partial prepayment, it reduces the loan principal. Hence, it attracts less interest as the principal amount is reduced. Thus, partial prepayment is one of the best ways to pay off personal loans in less time.

Shortens the Loan Tenure

Partial payments reduce the outstanding loan balance. If the borrower makes small payments every month, they can pay off the loan amount in a shorter duration, reducing the loan tenure.

Boost Future Borrowing Power

Prepaying a personal loan can increase an individual's creditworthiness. It shows the lender that the person can repay the loan amount responsibly. It allows the borrower to negotiate better loan terms like competitive interest rates, convenient loan features, and more.

Reduces Financial Stress

Paying off debt before time gives peace of mind and financial freedom. Partial prepayment is the right step towards being debt-free. It reduces the mental load associated with long-term financial commitment.

Understanding the personal loan eligibility criteria is essential before applying, as it ensures you meet the lender's requirements and improves your chances of approval.