EMI or Tenure deduction?

Описание: Let’s settle this today!

EMI or Tenure reduction which should you opt for? 🤔

Prepayment helps to reduce the loan faster 💨

But while one is making the prepayment, bank will ask the borrower, shall the prepayment be utilised to reduce EMI or tenure? What one must do? Which option is better?

🚨 Reducing the EMI will give you a better breathing space to manage your other debts. However, it will increase the overall interest burden on your loan. You will end up paying a huge interest amount on your loan amount.

✅ Meanwhile, reducing your tenure will allow you to pay off the loan earlier than originally planned.

There is no doubt that prepayment amount used for ‘tenure reduction’ is more profitable in terms of time and interest saved

EMI’s are like an expense set on auto-mode. Hence, its long term psychological effect on the payee (a common man) is not positive.

🙌🏻 If you can afford to pay the same EMI for a shorter period now it will be on your positive side.

Let’s take an example

Mr. A has a loan of 30,00,000 at 8% interest for 20 years (EMI - 25093)

At the end of 5th year (or 60 months) Mr. A decides to make a prepayment of 5,00,0000

🔹 If Mr. A opts for EMI reduction
New EMI - 20,300
Savings in interest cost - 3,60,000
Savings in time - 0 months/years

🔹 If Mr. A opts for Tenure Reduction
New EMI - Remains the same
Savings in interest - 8,75,000
Saving in time - 54 months or 5.5 years

➡️ Conclusion
If you want to save more on interest cost always go for time reduction

FREE TOOL for you guys!

Check out the link in my bio to get yourself a free prepayment calculator. It personally designed to check your savings in interest cost and time when you make a prepayment. Can be used towards any kind of loan