EMI
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Prepayments refer to any extra payments made towards the loan principal before the due date. These can have a significant impact on both your EMI and loan tenure.

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• Effect on EMI: If you make a prepayment, your outstanding loan balance decreases. As a result, the EMI might remain the same (if you continue with the same loan tenure), but the total interest you pay over the loan period will be reduced. The prepayment helps lower the overall loan burden.

  For example, if you have an outstanding loan of ₹500,000 and make a ₹50,000 prepayment, the EMI will likely remain the same if you choose not to adjust the tenure. However, the loan balance reduces to ₹450,000, which means you’ll pay less interest over time.

• Effect on Loan Tenure: Alternatively, making prepayments can also shorten the loan tenure. If you prefer to keep your EMI amount constant, making prepayments can reduce the loan term, as the principal amount is reduced faster.

  For example, if you had a 10-year loan and made substantial prepayments, the loan might be repaid in 8 years, with the same EMI.

In Summary: Prepayments reduce either your EMI amount or the loan tenure, depending on whether you opt to keep the EMI the same or reduce the loan term.

The loan tenure (duration) plays a major role in determining the EMI. Here’s how it affects your monthly payment:

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• Increasing Loan Tenure: If you extend the loan tenure (e.g., from 5 years to 10 years), your EMI will decrease. This happens because the repayment amount is spread over a longer period. While your monthly EMI will be smaller, the overall interest paid over the life of the loan will increase, as you’ll be paying for a longer period.

  Example: If your EMI for a ₹500,000 loan at 8% interest for 5 years is ₹10,000, extending the tenure to 10 years will lower the EMI to approximately ₹6,000, but the total interest paid will be higher over 10 years.

• Reducing Loan Tenure: On the other hand, shortening the loan tenure (e.g., from 10 years to 5 years) will increase your monthly EMI. Since the loan is repaid more quickly, each installment is higher, but the total interest paid will decrease.

  Example: Reducing the loan tenure to 5 years will likely result in an EMI increase (e.g., from ₹6,000 to ₹10,000), but you’ll pay less in interest over the loan's duration.

In Summary: Changing the tenure directly affects the EMI. A longer tenure means a smaller EMI, but more total interest; a shorter tenure means a larger EMI, but less interest paid in the long run.