Personal Loan: How you can save Rs 1.54 lakh in interest and 8 months in tenure on Rs 20 lakh loan
Personal Loan Calculator: Sometimes, we are in a situation when we can't take a home or a car loan; or to meet personal requirements, such as medical expenses, wedding, home renovation, emergencies, and vacations, we need to take a loan. Amid such a backdrop, one takes a personal loan. Such a loan doesn't have any collateral, so banks charge high interest on them. Personal loans are generally for 5 years. So, one needs to assess their repayment capacity before taking a personal loan. They need to check if they can repay equated monthly instalments (EMI) on time. However, if they are in excess of funds, they can prepay a part of their loan to reduce their overall interest amount. Here, through projections, we will show you how a 12.50 per cent prepayment of a personal loan can help one save Rs 1.54 lakh on a Rs 20 lakh, 5-year personal loan.
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(Disclaimer: Calculations are for knowledge purpose only. Actual calculations may vary from bank to bank)
Personal loan conditions
We are taking the example of a Rs 20 lakh personal loan that we are taking for 5 years (60 months). The interest rate for this loan is 13 per cent annually.
Personal loan EMI
Given these conditions, the estimated equated monthly instalment (EMI) for the loan will be Rs 45,506.
Personal loan Interest amount
On your Rs 20 lakh personal loan, you will pay an estimated interest amount of Rs 7,30,369.
Personal loan prepayment conditions
Here, you first need to make 12 EMIs for the loan. In the 13th month, you need to make a Rs 2.50 lakh prepayment (12.50 per cent of the total loan). After the prepayment, your remaining principal amount will be Rs 16,96,250.
How it may impact your personal loan
After prepaying Rs 2.50 lakh, your new estimated EMI will remain the same, but your tenure will be cut down to 4 years and 4 months.
How much money will you save on interest?
The revised interest amount of your loan will be Rs 5,76,999.
How much money will you save overall?
Since your earlier estimated interest was Rs 7,30,369, you will save estimated Rs 1,53,369 on your loan.
Personal Loan Calculation
Loan amount- Rs 2,000,000
Loan tenure- 5 years (60 months)
Rate of interest- 13%
EMI- Rs 45,506
Interest amount in 5 years- Rs 7,30,369
After 12 months, make a prepayment of Rs 2,50,000 of 12.5% of principal amount
After 1 year, outstanding principal- Rs 16,96,250
EMI- Rs 45,506
Revised Interest amount - Rs 5,76,999
How much will you save- Rs 1,53,369
New tenure - 4 Years 4 Months