How to save Rs 3.95 lakh in interest on Rs 25 lakh personal loan and repay 5-year loan in 3 years
Personal Loan Calculator: A personal loan can be taken for a number of reasons such as home renovation, medical needs, emergencies, or buying vehicles. There can be a number of ways to reduce your interest amount and tenure.
Personal Loan Calculator: If you are in need of money and can't get it from a known person, a personal loan can be one of the choices. People use personal loans in a number of ways, such as for emergency needs, medical requirements, home renovation, vacations, or buying a vehicle. Sometimes, when people don't get a loan in other categories, they apply for a personal loan. However, personal loans don't have collateral, and the lender may issue them at a higher interest rate compared to home or auto loans. Unlike a home loan, which can be up to 30 years of duration, personal loans are issued for up to 7 years. Since one pays a high interest rate on a personal loan, the total interest amount is also high. There can be a number of ways to reduce the interest amount. Here, through projections, we will tell you how one can reduce the interest amount by Rs 3.95 lakh and duration from 5 to 3 years on a Rs 25 lakh personal loan.
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Personal loan conditions
For our projections, we will take the example of a Rs 25 lakh personal loan at 13 per cent annual interest for 5 years.
What will be EMI?
The estimated EMI for such a loan will be Rs 56,883.
What will be the interest and repayment amount?
The estimated interest for this loan will be Rs 9,12,961, and the estimated repayment amount for it will be Rs 34,12,961.
What can be done to reduce the interest amount?
One can follow a number of ways for that, such as an increase in an EMI and prepayment. We will choose prepayment for our calculations.
What are prepayment conditions?
Here, one needs to make 2 prepayments of Rs 2.50 lakh each (10% of the principal amount).
The first prepayment will be made in the 12th month of the loan tenure and the second prepayment in the 24th month.
What are prepayment conditions?
E.g., if the personal loan EMI's starting month is September 2024, the first prepayment of Rs 2.50 lakh will be made in September 2025, and the second prepayment of the same amount will be made in September 2026.
How will it impact personal loan interest and duration?
It will reduce the interest amount as well as the duration of the loan.
What will be the new prepayment amount?
The new estimated prepayment amount will be Rs 30,18,893.
What will be the new duration?
Since the borrower is making 2 instalments of Rs 2.50 lakh each, the new tenure of the loan will be 36 months (3 years). It means that the borrower will save 2 years on prepayment of the loan.
How much money will be saved?
The estimated saved money thus will be Rs 3,94,068.