Question 1

Should I reduce EMI or reduce tenure when prepaying?

Accepted Answer

Reducing tenure typically saves more interest in the long run. However, reducing EMI provides immediate cash flow relief. Choose based on your financial priorities.

Question 2

Are there charges for loan prepayment?

Accepted Answer

For floating rate loans, RBI has mandated no prepayment charges. Fixed rate loans may have prepayment penalties of 2-4%. Check your loan agreement.

Question 3

When is the best time to prepay a loan?

Accepted Answer

Prepaying earlier in the loan tenure saves more interest since the outstanding principal is higher. The interest component is highest in the early years.

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