According to reports from KAARMIKA Wealth Mentors Pvt Ltd, a small increase in EMI payment can significantly reduce the total cost of a home loan. For a ₹1 crore home loan at 8.5% interest for 20 years, increasing the EMI by just ₹1,000 per month from ₹86,782 to ₹87,782 can reduce the loan tenure by nearly 7 months and save around ₹3.7 lakh in interest. The total interest outgo with the higher EMI becomes ₹1,04,53,206, resulting in a net interest outflow reduction of ₹3,74,474 over the loan tenure.
As reported by KAARMIKA Wealth Mentors Pvt Ltd, the new tenure calculation uses the formula N = log(EMI/EMI-P*R)/log(1+r), where N is the new tenure, EMI is the new increased EMI, P is the initial loan principal, and r is the monthly interest rate. With the revised EMI of ₹87,782, the tenure reduces to 233 months (nearly 7 months less than the original 240 months). The total payment over the reduced tenure comes to ₹2,04,53,206, demonstrating the substantial savings from the increased EMI amount.
According to KAARMIKA Wealth Mentors Pvt Ltd, the primary benefit of increasing EMI or pre-payment is reduction in interest outgo, and it is during the initial stage of home loan when the interest component in the EMI is the highest. The analysis shows that lower ticket size home loans may save even more as ₹1000 extra in EMI payment month-on-month will save more proportionally. The report emphasizes that small, disciplined prepayments can create big financial freedom, with the lesson being that even a small increase in EMI attacks the principal faster, making it more beneficial to start early with pre-payment strategies.
