Part Payment of Personal Loan: Everything You Need to Know

What is Part Payment?

During instances when you have additional cash at your disposal, be it through a bonus, additional savings, or an increase in income, utilizing these resources to make partial payments towards your personal loan can help you get closer to becoming debt-free quickly. 

Partial payment meaning is when you make additional payments towards your ongoing personal loan other than your monthly EMI. Doing this reduces your overall outstanding repayment, making your monthly EMIs more manageable.

Considering part payment personal loan? Read this blog to learn more about what is part payment in loan, how it works and why you should do it. 

How Personal Loan Part Payment Works?

When you take a personal loan from the lender, you agree to pay it back according to a repayment plan which is usually in the form of monthly installments called EMI. An EMI breaks down your total outstanding amount into smaller and more manageable payments.

However, if you find yourself in a situation where you have excess funds, you can make additional payments towards your existing loan, at any given point. Just make sure there aren’t any penalty charges associated with the same.

Here’s what happens when you go ahead with a part payment personal loan.

1) Your Outstanding Loan Reduces

Making part payments towards your outstanding loan lowers the total money you owe to your lender, reducing your financial obligations.

2) The Interest Rate Charged on the Loan Changes

A reduction in the outstanding amount you have to pay to your lender also leads to a revision of the interest rate charged on it.

3)  Your EMI Also Reduces

A reduction in your principal amount and interest rate will automatically reduce the EMI amount you have to pay every month. 

Read More: Personal Loan EMI Calculator

Charges on the Part Payment of Personal Loans

There are some lenders in the market that charge an additional fee on part payment of personal loans. This is because when you make part payments, it reduces the interest charged on it which is a loss for the lender. To compensate for this loss, they charge a prepayment penalty on it.   

However, there are a few lenders like Zype that don’t charge any penalty on prepaying or foreclosing the loan.  

Advantages of Personal Loan Part Payment

Part payment personal loan is a smart financial move that can help you become debt-free quickly. But the advantages of it are beyond that. Here’s how partial payments can ease your repayment experience as well.

1) Decrease in Interest Rate

When you make additional payments towards your personal loan, it decreases the total amount you owe to the lender. Hence, it also decreases the interest you have to pay on your personal loan.

2) Shorter Loan Tenure

Part payments can help you get free from your financial obligations quickly as you pay off a major portion of the total outstanding amount beforehand.

3)  Improve Credit Score

When you prepay your loans, it is reported to the credit bureau. This shows the lenders that you’re a financially responsible individual that can be trusted with credit. This automatically improves your credit score.

Read More: How to Improve Cibil Score?

4) Flexibility in Repayment

If your lender gives you the facility of making partial payments towards your loan, you can pay the loan whenever you want, according to your budget. This makes your loan repayments more flexible, as per your convenience. 

Things to Know Before Opting for Partial Payments

It’s important to understand exactly what is part payment in loan and its outcomes on your finances before making any partial payments. Here are some important things you should know beforehand:

  • Make sure your lender provides the facility of making partial payments on your ongoing personal loans.
  • Check if there are any additional charges associated with making partial payments on your personal loans. Since prepayments reduce the total interest charged on your loan, some lenders charge a prepayment fee to compensate for that loss.  
  • If you’re choosing a part payment personal loan to get free from your financial obligations quickly, make sure that your additional payments are helping you reduce the total principal amount of your personal loan and not just the interest. 

How to Apply for Part Payment of Personal Loans?

Making partial payments on your ongoing personal loans is a relatively easy process. If you have taken a personal loan from a bank or an NBFC, you can make the part payment on the net banking app or at the branch itself. But before you opt for part payment ensure there is no additional penalty associated with it.   

Read More: Why Opting For an NBFC Personal Loan is a Better Option?

Frequently Asked Questions

Is Part Payment Available For A Personal Loan?

Yes, most lenders allow borrowers to make partial payments on their personal loans. However, there are some lenders that charge an additional penalty for it.

Does Personal Loan Part Payment Affect Cibil Score?

Personal loan part payment can help you increase your CIBIL score as it shows you’re a financially responsible individual who can be trusted with credit.

What Is The Risk Of Personal Loan Part Payment?

The only risk of personal loan part payment is that there might be some additional charges associated with it. 

Is Personal Loan Part Payment A Good Option?

If you have additional cash at your disposal then using it to make partial payment towards your personal loan can help you get free from your financial obligation quickly.

How Many Part Payments Can Be Made?

Making partial payments on your ongoing personal loans is a relatively easy process. If you have taken a personal loan from a bank or an NBFC, you can make the part payment on the net banking app or at the branch itself.

Does Emi Reduce After Part Payment?

A reduction in your principal amount and interest rate will automatically reduce the EMI amount you have to pay every month.

What Are The Disadvantages Of Personal Loan Part Payment?

The only disadvantage of personal loan part payment is that there might be an additional charge associated with it. However, there are lenders like Zype who charge zero prepayment penalty fees.

What Is The Rule For Personal Loan Part Payment?

Usually, when you make partial payments towards your ongoing personal loan, you can pay 25% of the total outstanding amount and cannot make more than 2-part payments in a financial year.

How Can I Clear My Personal Loan Fast?

You can clear your personal loan fast by making partial payments of the personal loan. This will not only help you clear your loan quickly but also reduce the weightage of your future repayments.

What Is The Difference Between Part Payment And Prepayment?

In partial payments, the borrower pays a part of their total outstanding amount during their loan tenure to reduce their financial obligations, whereas, in prepayment, the borrower closes the entire loan by making the complete repayment.

Can I Pay Extra Emi For A Personal Loan?

Yes, you can. This is also known as part payments and can help you clear your outstanding loan quickly.