Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here

When deciding between reducing the EMI or the tenure of a home loan, each option has distinct impacts on total interest outflow and loan duration. For a Rs 75 lakh loan over 25 years, a significant prepayment could potentially save you Rs 25 lakh in interest and reduce the loan tenure by around 64 months (over 5 years). Here’s a breakdown of how each option works and which one achieves these goals:

### 1. **Option 1: Reduce EMI**

   - **Impact on Monthly Payment**: By making a lump sum prepayment and opting to reduce the EMI amount, your monthly outflow becomes lower, offering immediate financial relief.

   - **Interest Savings**: While EMI reduction saves on interest to some extent, it does not maximize interest savings, as the loan term remains long.

   - **Tenure Impact**: The original tenure remains mostly the same, so the loan may still take close to the full 25 years to repay.

   - **Best For**: If cash flow flexibility is a priority over total interest savings, reducing EMI is ideal.

### 2. **Option 2: Reduce Loan Tenure**

   - **Impact on Total Tenure**: A lump sum prepayment with a focus on reducing tenure shortens the loan term, allowing the borrower to pay off the loan faster.

   - **Interest Savings**: Reducing tenure results in substantial interest savings, as you pay for fewer months. This is because interest is charged on the outstanding balance for a shorter period.

   - **Achieving Rs 25 Lakh and 64 Months Savings**: By reducing tenure instead of EMI after making a prepayment, you can save around Rs 25 lakh in interest and cut the loan duration by approximately 64 months (or over 5 years), depending on the prepayment amount.

   - **Best For**: This option is ideal for those aiming to maximize interest savings and pay off their loan sooner.

### **Conclusion**

To save Rs 25 lakh in interest and reduce the loan tenure by around 64 months, **choose the option to reduce the tenure** after making a significant prepayment. This approach minimizes the total interest paid and enables you to be debt-free faster.