How to reduce home loan tenure and save on interest

In summary

Reducing home loan tenure helps borrowers repay their outstanding principal sooner and lower future interest expenses. The appropriate method depends on your monthly income, available savings, interest rate and lender's repayment options.

• Increasing EMI can shorten the repayment period without requiring a large one-time payment.
• Part-prepayment reduces the principal and can shorten tenure when EMI remains unchanged.
• On a Rs. 40 lakh loan at 7.50% p.a., increasing EMI by Rs. 5,000 can save approximately Rs. 10.81 lakh in interest.
• An earlier part-prepayment generally saves more interest than the same payment made later, under identical conditions.
• Eligible individual floating-rate home loans carry nil part-prepayment charges under the applicable RBI framework.
• A lower interest rate can support tenure reduction, but refinancing expenses must be considered.

Check your current outstanding loan, EMI and remaining tenure before changing the repayment plan. Existing Bajaj Finance borrowers can review their accounts through the Bajaj Finance customer portal.

You can reduce your home loan tenure by repaying the principal faster or reducing the interest charged on the outstanding balance.

The main approaches are increasing the EMI, making part-prepayments, requesting a shorter tenure or negotiating a lower rate.

The effect depends on the current loan balance, interest rate and remaining repayment period.

For example, a borrower with 15 years remaining can request a revised schedule based on a higher EMI.

Another borrower receiving a substantial annual bonus may prefer part-prepayment.

The better option depends on how much additional repayment each borrower can comfortably afford.

Increasing your EMI allocates more money towards repayment of the outstanding principal, assuming the rate remains unchanged.

Consider Rohan, a 35-year-old salaried professional in Pune earning Rs. 1.40 lakh monthly.

He has a Rs. 40 lakh home loan at 7.50% p.a. for 20 years and wants to repay it faster.

The increased EMI shortens the repayment period by approximately five years and one month.

Rohan must pay an additional Rs. 5,000 monthly.

Before requesting the change, he should check whether the higher repayment fits his household expenses and other debts.

The example assumes a constant interest rate, no additional charges and an unchanged loan principal at the start.

Actual results depend on the lender's revised repayment schedule.

Even a smaller EMI increase can reduce the repayment period because the additional amount helps pay down principal faster.

Using Rohan's Rs. 40 lakh loan at 7.50% p.a., compare three monthly repayment options.

Illustrative monthly reducing-balance calculations. Final instalments and totals are rounded.

For example, Rohan may initially choose a Rs. 2,000 increase if his salary has risen modestly. If his income improves further, he can review another increase, subject to the lender's process.

He should avoid committing to a higher EMI solely to reach the shortest possible tenure.

Regular repayment without financial strain matters more than an aggressive schedule that becomes difficult to maintain.

Part-prepayment reduces the outstanding principal through an additional payment beyond the scheduled EMI.

If the lender keeps the EMI unchanged and reduces the tenure, the lower principal can be repaid sooner.

Consider Meera, a 38-year-old salaried professional in Bengaluru.

She originally borrowed Rs. 40 lakh for 20 years at 7.50% p.a.

After five years of regular repayment, her approximate principal outstanding is Rs. 34.76 lakh.

She receives a bonus and considers paying Rs. 5 lakh towards the principal.

Under these assumptions, the part-prepayment shortens the remaining schedule by approximately three years and six months.

Meera should ask the lender to apply the payment towards principal and provide a revised repayment schedule.

The calculation assumes a constant rate, no extra charges and tenure reduction rather than EMI reduction.

Paying one extra EMI annually can help shorten tenure because the additional amount reduces outstanding principal.

However, the saving depends on the loan balance, interest rate, payment timing and remaining term.

Consider Kavya, a 32-year-old salaried professional in Chennai.

She has a home loan EMI of Rs. 32,224 and expects to receive an annual performance bonus.

Instead of increasing her fixed monthly EMI, she plans to allocate one additional EMI amount towards principal every year.

This approach may suit her because the additional payment follows her annual income cycle.

However, Kavya should first confirm that the lender permits the requested part-prepayment arrangement.

She should also check any minimum payment requirements and whether the loan's terms allow the tenure to be reduced.

The extra payment must be applied to principal, rather than treated as an advance instalment, to obtain the intended amortisation benefit.

Choose tenure reduction when your priority is lowering total interest and becoming debt-free sooner. Choose EMI reduction when you need greater monthly repayment flexibility.

Consider Meera's Rs. 5 lakh part-prepayment.

She has two possible objectives.

If she keeps her EMI unchanged, the reduced principal allows the loan to finish sooner.

If she keeps the original remaining tenure, the lender may be able to recalculate a lower EMI.

For example, Meera may prefer tenure reduction if her income is stable and she has adequate savings.

A borrower managing new household expenses may prefer a lower EMI.

Both approaches can provide benefits. The choice should reflect the borrower's present financial situation rather than interest saving alone.

Yes. A lower interest rate can shorten the repayment period if the borrower maintains an EMI higher than the revised amount required for the existing tenure.

Consider Aditya, a 39-year-old salaried homeowner in Hyderabad.

He has an outstanding home loan and receives an offer to reduce the applicable interest rate.

Aditya should ask for two repayment illustrations: one keeping the remaining tenure unchanged and another maintaining the current EMI.

If he keeps the existing tenure, the revised rate may reduce his EMI.

If he keeps the EMI unchanged, the lower interest portion may allow faster principal repayment.

However, rate revision and balance transfer can involve fees.

A lower rate is beneficial only when the expected savings justify the associated costs and repayment terms.

Review the effective rate, processing charges and remaining tenure before making a decision.

A change in the applicable benchmark can affect the EMI, remaining tenure or both on a floating-rate home loan.

When interest rates increase, keeping the EMI unchanged can extend the repayment period.

When rates decline, maintaining the earlier EMI can potentially shorten the tenure.

RBI's framework for EMI-based floating-rate personal loans requires lenders to provide relevant repayment options at reset, including changes to EMI or tenure, or a combination.

Borrowers also have prescribed options concerning prepayment and switching rate structures.

For example, Aditya receives a notice that his floating interest rate has increased.

He should review the revised amortisation schedule instead of assuming his original maturity date is unchanged.

If the lender proposes extending the tenure, he can assess whether increasing his EMI would maintain the intended repayment period.

The lender must explain the relevant options and applicable terms.

Source: Reserve Bank of India – Floating-rate EMI reset.

Prepayment charges depend on the borrower category, loan purpose, interest rate structure and applicable regulation.

Under RBI's framework, eligible floating-rate home loans to individuals for non-business purposes do not attract part-prepayment charges.

Bajaj Finance also specifies nil part-prepayment charges for individual borrowers with floating-rate home loans.

Fixed-rate and other product categories can have different terms.

For loans sanctioned or renewed from 1 January 2026, RBI's updated prepayment directions apply according to their specified conditions.

Before paying, request the current fee schedule for your loan variant.

Do not assume that charges applicable to a fixed-rate or business-purpose loan apply to an eligible individual floating-rate home loan.

A balance transfer can help when another lender offers a lower effective rate and the expected interest savings exceed the transfer costs.

However, a lower advertised rate does not automatically mean the repayment period will shorten.

Consider Nisha, a 37-year-old salaried professional in Mumbai.

She has Rs. 38 lakh outstanding on her home loan and wants to reduce her remaining tenure.

Before transferring, Nisha should compare:

• Existing loan interest rate and remaining tenure.
• Proposed lender's effective rate.
• Processing, legal and transfer-related expenses.
• EMI required to achieve her preferred repayment period.
• Total future interest under both schedules.

If Nisha transfers to a lower rate but extends the tenure considerably, she may not achieve her original objective.

Bajaj Finance offers eligible borrowers a home loan balance transfer facility.

After comparing the proposed rate and complete transfer cost, check your Bajaj Finance Home Loan eligibility to assess refinancing options.

Avoid an aggressive repayment plan if it leaves insufficient funds for essential expenses, existing debts or emergencies.

Consider Sameer, a 42-year-old self-employed professional in Ahmedabad.

His monthly income varies, and he has an outstanding home loan EMI of Rs. 35,000.

He has Rs. 6 lakh in accessible savings but needs money for business obligations and his family's expenses.

A large part-prepayment might reduce his future interest, but it would also reduce his financial flexibility.

Sameer should first assess essential cash reserves and the predictability of his income.

He may prefer smaller payments after receiving surplus business income rather than commit to a permanent EMI increase.

Reducing tenure is useful when the new repayment plan remains sustainable.

Existing Bajaj Finance Home Loan borrowers can review their active loan and available service requests through the customer portal.

The exact options depend on the loan account and product terms.

Follow these steps:

1. Open the Bajaj Finance customer portal.
2. Log in using your registered credentials.
3. Select the active home loan account.
4. Review the outstanding principal and existing repayment schedule.
5. Locate the applicable service-request option or contact the authorised servicing team.
6. Request the required EMI or tenure change, or eligible part-prepayment.
7. Confirm the applicable terms and charges.
8. Obtain written confirmation and the revised amortisation schedule.

Continue paying the existing EMI until the revised arrangement is formally confirmed.

A request does not automatically change the repayment schedule or cancel any overdue instalments.

Begin with your current outstanding principal, interest rate, EMI and remaining tenure.

Calculate how much additional repayment is affordable without reducing essential savings.

Compare a higher EMI with a lump-sum part-prepayment.

If interest rates have changed, request a revised schedule before deciding.

Check the applicable prepayment charges and lender's repayment-adjustment process.

If you are considering a balance transfer, compare total savings after all transfer expenses.

Finally, obtain the lender's written confirmation of the revised tenure.

The right repayment plan should reduce borrowing costs while remaining manageable throughout the loan.