Personal loans are one of the most popular forms of credit in India, but they also carry high interest rates. One of the smartest ways to reduce your total loan burden is through part-payment — a feature offered by most banks and NBFCs.
If you receive a bonus, salary hike, incentives, cashback, or any lump sum amount, using it for part payment can help lower your interest outgo significantly.
Here’s a complete guide on what part-payment means, how it works, and when you should use it.
What Is Part Payment on a Personal Loan?
Part payment (also called partial prepayment) means paying a portion of the outstanding principal before your EMI schedule ends.
Unlike foreclosure, you don’t close the entire loan — you only repay a part of it.
Example:
Outstanding amount: ₹3,00,000
You pay part payment: ₹50,000
Your new outstanding = ₹2,50,000
This reduces your total interest and can lower either:
your EMI amount, or
your loan tenure
depending on what you choose.
Benefits of Part Payment
✔ 1. Reduce Total Interest Burden
Interest is charged on outstanding principal.
Lower principal = lower interest → big savings.
✔ 2. Shorten Your Loan Tenure
Most banks reduce tenure after part payment, helping you finish the loan faster.
✔ 3. Reduce Monthly EMIs (If You Prefer)
You can request the bank to lower your EMI instead of tenure.
✔ 4. Boost Your Credit Score
Lower outstanding balance improves your credit profile.
✔ 5. Flexibility
You can part-pay multiple times during the loan if allowed by the lender.
How Does Part Payment Work?
Step 1: Contact your bank/NBFC through app/branch/customer care
Step 2: Check minimum part-payment amount (usually 2–5 EMIs)
Step 3: Make the payment via net banking, UPI, cheque, or app
Step 4: Bank updates your loan schedule
Step 5: Choose tenure reduction or EMI reduction
When Is the Best Time to Make a Part Payment?
The earlier you do it, the more interest you save.
✔ Best time:
During the first 6–24 months of the loan
(because EMIs mostly go toward interest in early months)
✔ Avoid:
Doing part payment in the last few months, as interest savings will be minimal.
Part Payment vs Foreclosure
| Feature | Part Payment | Foreclosure |
|---|---|---|
| You repay entire loan? | ❌ No | ✔ Yes |
| Loan closes fully? | ❌ No | ✔ Yes |
| Helps reduce EMI/tenure? | ✔ Yes | No EMI after foreclosure |
| Charges apply? | Sometimes | Usually yes |
| Best when? | Have medium savings | Have full amount to close |
Are There Charges for Part Payment?
Banks/NBFCs may charge a fee depending on:
Loan type
Whether fixed or floating rate
Time of repayment
Most lenders allow free part-payments after 6–12 EMIs for salaried customers.
Charges (if any) usually range from 1–3% of the amount part-paid.
Eligibility Rules for Part Payment
Each lender has its own rules. Common ones include:
Minimum part-payment amount (₹5,000 to ₹25,000)
Must have paid at least 3–6 EMIs
No pending EMI bounce
PAN-based limits on prepayments
Only lump-sum payments allowed, not monthly extra EMIs
Always check your loan agreement.
How Much Can You Save? (Quick Example)
Loan Amount: ₹3,00,000
Interest Rate: 14%
Tenure: 48 months
If you make a ₹50,000 part payment in year 1:
✔ Tenure reduces by 8–10 months
✔ You save ₹18,000–₹23,000 in interest
Should You Make Part Payments?
Yes, if:
You have surplus cash like incentives, bonus, or profit
You want to reduce loan burden
You want to improve credit score
You want to save on interest
Avoid if:
You have credit card dues (since card interest → 36–42%)
You have no emergency fund
You are planning major expenses soon
FAQs
1. What is part payment on a personal loan?
It is paying a part of your outstanding loan amount before the scheduled time.
2. Does part payment reduce EMI or tenure?
You can choose either — most borrowers reduce tenure for maximum interest savings.
3. Are there charges for part payment?
Some lenders charge 1–3%, but many allow free part payments after certain EMIs.
4. How often can I part-pay?
Most lenders allow multiple times per year, subject to minimum amount rules.
5. Does part payment improve credit score?
Yes, as it lowers your credit exposure and improves financial health.
Published on : 22nd November
Published by : SMITA
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