A personal loan can help you manage urgent financial needs, but the high interest rates make many borrowers look for ways to close the loan early.
Two popular options are pre-closure (full repayment) and part-payment (partial repayment).
Both options help reduce interest, but the impact and timing differ.
Here is a clear guide to help you choose the right strategy in 2025–26.
What Is Personal Loan Pre-Closure?
Pre-closure means paying off the entire remaining loan amount at once, before the tenure ends.
Key Benefits:
Saves a large amount of future interest
Eliminates EMI burden
Improves credit score
Frees up monthly cash flow
Possible Drawbacks:
Foreclosure charges (2%–5%)
Loss of tax benefits (if any)
Requires large lump-sum amount
May impact cash savings
What Is Part-Payment?
Part-payment means paying a chunk of your loan amount while continuing the remaining EMIs.
Example:
If you owe ₹3 lakh and pay ₹50,000 as part-payment, interest is recalculated on the reduced balance.
Key Benefits:
Reduces principal
Lowers future interest
Lowers EMI or shortens tenure
Helps without full pre-closure
Possible Drawbacks:
Some banks allow only limited part-payments
Minimum amount required (often ₹10,000+)
Charges may apply (varies by lender)
Pre-Closure vs Part-Payment: Which Is Better?
| Feature | Pre-Closure | Part-Payment |
|---|---|---|
| Interest Savings | Highest | Medium–High |
| EMI Reduction | Yes (loan ends) | Yes (optional) |
| Cash Requirement | High | Moderate |
| Impact on Score | Strong | Good |
| Flexibility | Low | High |
Choose pre-closure if you have strong savings.
Choose part-payment if you want interest savings without draining your funds.
Best Timing for Pre-Closure & Part-Payment
✔ Best Time: First Half of the Loan Tenure
Personal loans follow a reducing balance method, but the lender takes most interest in the initial EMIs.
Doing pre-closure or part-payment in the first 12–18 months saves maximum interest.
✔ Second Best Time: When You Get Bonus / Incentives
Use one-time money like:
Bonus
Tax refund
Incentive
Maturity payout
Gifts or windfall
✔ Avoid Doing It Near Loan End
In the last 6–9 months, closing the loan early saves very little interest.
When You Should Choose Pre-Closure
✔ You have high-interest personal loans (12%–24%)
✔ You have enough emergency savings
✔ You want to reduce monthly EMIs entirely
✔ You want to improve credit score quickly
✔ You want to avoid long-term interest outgo
When You Should Choose Part-Payment
✔ You cannot fully close the loan
✔ You want to reduce EMI or tenure
✔ You receive moderate surplus funds
✔ You want to manage loan without disturbing savings
Important Charges to Check Before Deciding
Foreclosure charges: 2%–5%
Part-payment charges: 0%–3%
GST on charges: 18%
Minimum part-payment amount
Cooling period: Some banks allow closure only after 6–12 months
Always calculate your net savings before deciding.
FAQs
Q1. Which saves more — pre-closure or part-payment?
Pre-closure saves the most interest, but part-payment is more flexible.
Q2. Does pre-closure increase credit score?
Yes. Closed loans boost your credit profile.
Q3. Can I reduce EMI after part-payment?
Yes, you can choose to lower EMI or shorten tenure.
Q4. Is pre-closure allowed anytime?
Most banks allow it only after 6–12 months from loan disbursement.
Q5. Does pre-closure attract charges?
Yes, personal loans usually have foreclosure fees.
Published on : 15th November
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed