Loans · Clarivo Finance Editorial

Home-loan prepayment: reduce tenure or reduce EMI?

Understand the trade-off before using a bonus, windfall or annual savings to prepay a home loan.

Start with the loan statement

Before deciding anything, collect the outstanding principal, interest rate, EMI, remaining tenure and the lender’s prepayment terms.

Reducing tenure

With a tenure reduction, the EMI broadly stays similar and the loan finishes earlier.

Reducing EMI

With an EMI reduction, the tenure broadly stays similar but the required monthly payment falls.

Make the choice fit your household

There is no universal best option. The right choice depends on cash-flow resilience, job stability, interest rate, emergency savings and competing goals.