Reduce EMI or Reduce Tenure? Sakshi Jain Shares Smart Home Loan Advice

Whenever people receive a bonus, salary hike, or extra income, many decide to prepay a part of their home loan. It is a smart financial move because it helps reduce the overall loan burden faster.

But after making a prepayment, banks usually give borrowers two options:

• Reduce the EMI and keep the loan tenure the same
• Reduce the loan tenure and continue paying the same EMI

Most people choose the first option because a lower EMI gives immediate monthly relief. However, financial experts believe the second option can save much more money in the long run.

CA Sakshi Jain recently explained this in her latest video with a simple example.

Example of a Rs. 1 Crore Home Loan

Suppose a person takes:

• Home loan amount: Rs. 1 crore
• Loan tenure: 20 years
• Interest rate: Around 8.5%
• Approximate EMI: Rs. 83,000 per month

Now imagine the borrower receives a bonus and makes a prepayment of Rs 5 lakh after a few years.

After this prepayment, the bank again offers two choices:

• Lower the EMI
• Lower the loan tenure

According to Sakshi Jain, many borrowers think reducing EMI saves more money. But in reality, reducing the tenure can help save nearly ₹17 lakh in interest over the complete loan period.

Why Reducing Tenure Saves More Money

In the early years of a home loan:

• A major part of the EMI goes towards interest
• A smaller part goes towards the principal amount

When you reduce the loan tenure:

• Future interest payments reduce significantly
• The loan closes earlier
• Total interest outflow becomes much lower
• What Financial Experts Suggest

If your monthly income is stable and you can comfortably continue the same EMI, then:

• Choose tenure reduction instead of EMI reduction
• Make prepayments in the early years of the loan
• Focus on becoming debt-free faster

A small decision after prepayment can make a huge difference and help save lakhs over time.

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