What is Part Payment? A Simple Guide for Beginners
If you have a home loan, personal loan, or any installment-based debt, making **part payments** can help you save thousands in interest and become debt-free faster. But what exactly is part payment, and how does it work? Let’s break it down in simple terms.
💡 What is Part Payment?
A part payment (also called **prepayment** or **partial payment**) is when you pay an extra amount toward your loan over and above your regular EMI.
For example, if your home loan EMI is ₹30,000 per month, and you pay an additional ₹50,000 in a lump sum, that’s a part payment.
💰 Why Should You Make Part Payments?
Part payments help in two major ways:
1️⃣ Reduce Total Interest
Since loans charge interest on the **remaining principal**, paying extra reduces the principal faster, lowering interest over time.
2️⃣ Shorten Loan Tenure
You can either **reduce EMI** (keep the same tenure) or **reduce tenure** (keep the same EMI). Most people choose the latter to become debt-free faster.
📅 Types of Part Payments
One-Time Part Payment
A lump-sum payment (e.g., from a bonus, tax refund, or savings). Best for immediate principal reduction.
Recurring Part Payment
Extra payments made monthly, quarterly, or yearly. Ideal for systematic wealth building.
📊 How Much Can You Save?
Use our Part Payment Calculator to see:
- Interest saved over the loan term
- Reduced EMI or shortened tenure
- Comparison between one-time vs. recurring payments
⚠️ When Should You Avoid Part Payments?
- If your loan has prepayment penalties (common in fixed-rate loans)
- If you have higher-interest debt (credit cards, personal loans)
- If it depletes your emergency fund
Ready to Save on Your Loan?
Try our calculator to see how part payments can work for you!
Calculate Your Savings Now