30-Year vs 25-Year Loan: What ₹2,863 Extra EMI Can Do for You

Did you know, opting for a shorter loan tenure can help you save a significant corpus? In most cases, individuals look for a minimum EMI option, considering their financial comfort. However, by increasing your EMI slightly, you can repay a loan of ₹90 lakh loan for 30 years in 25 years. This can save you nearly ₹32 lakh in interest payment. Confused? Let’s break it down.

Scenario 1: You Make Loan Repayment in 30 Years

Here’s a complete breakdown of your monthly EMIs and overall interest payments if you opt for paying a ₹90 lakh home loan in 30 years:

• Loan Amount: ₹90,00,000
• Tenure: 30 years
• Estimated EMI: ₹77,655 per month
• Total Interest Payable: ₹1,89,55,648
• Total Repayment Amount: ₹2,79,55,648

Scenario 2: You Make Loan Repayment in 25 Years

When it comes to home loans, most people opt for longer tenures and lower EMIs to stay within their comfort zone. However, a slight adjustment to your repayment plan could save you a significant amount of money and time. Here’s how:

• Loan Amount: ₹90,00,000
• Tenure: 25 years
• Estimated Total Interest: ₹1,51,55,290
• Total Repayment Amount: ₹2,41,55,290

Numbers Speak: Comparing 30-year vs 25-year tenure

In a 30-year tenure, the monthly EMI will be approximately ₹77,655, and the total interest paid over the period will be around ₹1,89,55,648. Now, if you reduce the tenure to 25 years, the EMI increases to ₹80,518 (just ₹2,863 more). However, the total interest paid drops to approximately ₹1,51,55,290.

How Much Money Can You Expect to Save?

The estimated amount saved because of an increase in EMI will be approximately ₹32,00,358 (₹1,89,55,648 - ₹1,51,55,290). On the other hand, the time saved will be 5 years.

Why Choose a Shorter Tenure?

• Shorter tenures lead to reduced overall interest payments.
• Paying off the loan early gives financial freedom sooner.
• Enables individuals to channel funds into other investments earlier.

Read more: Small EMI, Big Cost? ₹15 Lakh Loan Compared Over 25 vs. 15 Years

Conclusion

Opting for a shorter loan tenure, even with a slightly higher EMI, can significantly reduce your interest burden and help you achieve financial freedom faster. A well-planned repayment strategy not only saves you money but also opens up opportunities for smarter financial growth in the future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.