Taking a personal loan is often a quick solution for financial needs such as medical expenses, weddings, education, or travel. However, the interest burden of such loans can be significant. If you wish to reduce your debt faster, part payment can be a smart strategy.
In this blog, we will explain how part payment works, why it benefits borrowers, and show a practical example of an SBI personal loan of ₹5,00,000.
What is Part Payment in Personal Loans?
Part payment means paying a lump sum amount over and above your regular EMI. This extra payment directly reduces your outstanding principal amount, which in turn reduces the overall interest you pay.
For example, if you have a ₹5 lakh loan with a 5-year tenure, and you suddenly receive a bonus or savings of ₹1 lakh, you can use that money for part payment. This will reduce your loan burden significantly.
Benefits of Part Payment
- Faster Loan Closure – Since your principal reduces, you can close your loan earlier than the original tenure.
- Lower Interest Burden – The reduced principal means the interest charged every month also decreases.
- Improved CIBIL Score – Regular repayments along with early closure enhance your credit score.
- Mental Peace – Lesser debt brings financial freedom and reduces stress.
Example: ₹5 Lakh Personal Loan from SBI
Let us assume:
Loan Amount: ₹5,00,000
Tenure: 5 years (60 months)
Interest Rate: 11% p.a.
EMI (approx.): ₹10,871
Case 1: Without Part Payment
Total EMI for 60 months = ₹10,871 × 60 = ₹6,52,260
Total Interest Paid = ₹6,52,260 – ₹5,00,000 = ₹1,52,260
So, you will pay ₹1.52 lakh as interest if you don’t make any part payment.
Case 2: With Part Payment of ₹1,00,000 after 12 Months
Suppose after 1 year, you get ₹1,00,000 (bonus/savings) and use it for part payment.
After 12 months, your outstanding loan = approx. ₹4,42,000
You pay ₹1,00,000 as part payment → new outstanding = ₹3,42,000
Revised EMI remains the same, but tenure reduces.
✅ Instead of 60 months, the loan will close in about 43 months.
✅ Total interest paid reduces to ₹1,07,000 (approx.).
👉 Savings = ₹45,000 on interest + early closure by 17 months!
SBI Personal Loan Part Payment Rules
SBI generally allows part prepayment after 1 year of taking the loan.
You may need to pay a part prepayment charge (usually 3% of prepaid amount, depending on the scheme).
Part payment is allowed multiple times during the loan tenure.
Always check your loan agreement or confirm with your branch before making part payments.
Tips Before Making Part Payment
- Check Charges – Ensure that part payment charges are not higher than your savings in interest.
- Use Surplus Wisely – Only use extra funds that won’t affect your daily financial needs.
- Do It Early – The earlier you make part payments, the more interest you save.
- Ask for Revised Statement – After part payment, get a fresh amortization schedule from the bank.
Final Thoughts
Part payment is a powerful tool to close your personal loan early and save a significant amount on interest. In our example, a borrower of a ₹5 lakh SBI personal loan saved ₹45,000 in interest and became debt-free 17 months earlier just by making a ₹1 lakh part payment.
If you have extra funds from bonuses, salary hikes, or investments, consider using them for part payments. This small financial discipline can bring you closer to a debt-free life much faster.
