Difference Between Prepayment And Partial Payment Of A Personal Loan

Easily accessible without any collateral, a personal loan can be the perfect solution to get through financially challenging times. Offered without any end usage restrictions, use personal loans for meeting various fund requirements, such as paying off medical bills, managing higher education costs, funding a grand wedding, etc. One can effortlessly apply online for a personal loan in India through the concerned bank’s website from their home’s comfort.

Offered at an affordable rate of interest, consolidating debts with personal loans can prove beneficial when handled carefully. While a person can use the entire loan tenure to pay off the loan, it increases the total amount to be repaid due to fixed monthly interest charges along with the principal amount. Hence, the concept of prepayment and partial prepayment of personal loans play a crucial role in reducing the total loan amount and saving substantial funds to invest elsewhere.

Scroll down to know about the difference between personal loan prepayment and partial payment.

Convenient to avail and quickly disbursed, a personal loan is paid back in equated monthly instalments (EMIs) calculated by adding a certain part of the principal amount and a significant interest amount. When the EMIs are paid until the end of loan tenure, it costs you considerable extra money compared to the original loan amount. To save additional funds, one can opt to pay the loan amount back through any of the following methods:

  • Personal loan Prepayment 

Suppose the borrower has extra funds and wants to repay the complete loan amount relatively early into loan tenure. In that case, it is generally termed as the prepayment of a loan, which saves a lot on interest. Typically, the bank charges a nominal fee as a penalty if the borrower wishes to close the loan through prepayment mode. In most cases, a personal loan has a lock-in period, after which the customer can prepay the entire outstanding amount at their convenience. 

In addition to easing out the financial burden, prepayment of a personal loan also improves your credit score in the long run by validating your debt-handling ability. 

  • Personal loan Partial Prepayment

If the borrower has a lump sum amount of money at their disposal and opts to pay a part of the principal loan amount, it is called a partial prepayment of the loan. Closing the personal loan partially before the loan tenure helps decrease the unpaid principal amount, automatically reducing substantial loan cost. However, one must pay a significant amount of money for partial prepayment to bring down the principal amount, as making small payments might not create much of a difference. 

Final words

While personal loans are easy to acquire and come without any end-use obligation, always read the loan agreement carefully. It is highly recommended to understand the lender’s terms and conditions along with numerous hidden fees, especially foreclosure charges before you opt for full or partial prepayment of a personal loan.


Hi, I am, a professional blogger. I have done MBA in Finance and worked in many finance organizations. I have worked on top financing firms for the past 4 years. Recently I am working on various blogs.