Buddy Loan is a loan aggregator in India that offers personal loans at lower interest rates starting from 11.99% per annum, making them more attractive for borrowers facing high rates of 15-20%. The document explains the advantages of pre-payment and part-payment options for these loans, demonstrating potential savings on interest by reducing the principal amount owed. By prepaying or making a significant partial payment, borrowers can effectively lower their total interest payments and EMIs.

1. PRE-PAYMENT AND
PART PAYMENT OF
PERSONAL LOAN
BUDDY LOAN – THE NEW AGE LOAN AGGREGATOR

2. INTRODUCTION
➢ The interest rate paid on personal loans are very high at about 15-20 per cent, the
reason being these loans are mostly unsecured in nature. Personal loans are very
popular in India as they help people get access to cash for temporary or urgent
needs.
➢ Explore Buddy Loan in order to reap more benefit for any personal loan. This loan
aggregator disburses the loan at an interest rate starting at 11.99% p.a. Knowing
what fits better for the borrower's profile there many viable options Buddy Loan
offers to settle the repayment with a tenure of 5 years.
➢ Cash amount such as loans for consumer durables, health treatment, wedding or
even vacations is offered by a number of banks with little variations in the fees and
charges. If these loans can be prepaid or partly paid, there are certain advantages
which customers can avail.

3. WHAT IS PREPAYMENT?
➢ If the prepayment is done early on during the tenure of your loans, you can end up saving
a lot of interest. Generally, a personal loan comes with a lock-in period of about one year
after which entire outstanding can be prepaid.
➢ For instance: - If personal loan principal amount is of 2 lakhs at an interest rate of 11.99
% and tenure of five years, The monthly EMI amounts to Rs 4449. The total amount to be
paid with interest sums up to Rs.2,66,933. If customer prepays now the full amount, he
would save Rs 57,422 interest payment.
➢ Suppose personal loan is of 3 lakhs for the tenure of 5 years at an interest rate of
11.99%, an extra interest of ₹1,00,400 should have been paid. The loan EMI payment
would be Rs ₹6,673 or about 33% of total interest, second-year payment would be Rs
35,084 or 27% of total interest, while one pays Rs 26,956 in the third year or 21% of
total interest, Rs 17,522 or 14% in fourth year and Rs 6571 or only 5% in final year. The
above example holds good for a floatable interest rate.
➢ The trick is to prepay the entire amount in tenure of the loan so that one can take
advantage of paying less on interest.

4. WHAT IS PART PAYMENT?
➢ Part-payment of a personal loan refers to paying a lump sum amount of money, that
is a part of but not the entire outstanding loan amount. This works because it brings
down the unpaid principal amount, which in turn reduces the EMIs and total interest
paid. However, one has to keep in mind it only works when you pay off a significant
amount in one go.
➢ It is an easy but effective way to reduce your interest amount as part payment
directly gets deducted from one’s principal outstanding effectively from the
particular date or month when the partial payment is made.
➢ For instance, if you take a loan of 3 lakhs for 5-years term at 15%, you will have to
pay an interest amount of RS 1,28,219. However, if you make a nominal partial
payment of INR 50000 after your 6th EMI, you will end up saving 32% of the interest
amount.