Do this after taking a loan, you will have to pay less interest, your Cibil score will also increase, and the bank will say- 'You did a great job'!

If you are thinking of repaying some part of the loan, then this can be a wise option. This reduces the burden of interest on you. At the same time, it also has a positive effect on your CIBIL, not a negative one.

Everyone takes a personal loan at some point or another. When people get some kind of bonus or lump sum amount, they think of repaying some part of the loan. Now the question arises whether this should be done? Will this spoil the CIBIL score, because the loan period i.e. the credit period will decrease.

If you are thinking of repaying some part of the loan, then this can be a wise option. This reduces the burden of interest on you. At the same time, it also has a positive effect on your CIBIL, not a negative one. So is it right to make part-payment every time? Does it improve your credit profile? Let's understand.

First understand what part-payment is

When you pay more than the fixed EMI every month or pay some lump sum in between, but do not repay the entire loan amount, it is called part-payment. This is an additional amount above the EMI which reduces the principal of your loan, due to which the interest charged on you reduces.

What is the effect on the credit score?

Part-payment does not directly increase the credit score, but it gradually strengthens your credit health. Paying EMI on time and reducing the loan amount improves your financial image. By doing this, the message goes to the credit information companies that you can manage your loan better and repay it easily. This creates a positive history in the credit report.

Credit utilization ratio reduces

When you pay part of the loan, the remaining loan amount reduces. This reduces your credit utilization ratio, which helps in increasing the score. This also shows that you are handling the loan in a responsible manner.

EMI burden reduces, loan ends quickly

If you keep making some extra payments above the EMI, the loan ends quickly. This improves your cash flow in the future and saves money for other needs.

Make part-payment from a bonus or savings

When you get an annual bonus or have any additional income, making part-payment from that amount can be a good option. This not only saves interest, but also helps in finishing the loan before time. Let us tell you, part payment reduces your principal, due to which you get the benefit of interest.

Some precautions are also necessary

Although part-payment is beneficial, it is important to keep some things in mind. Some loans have a prepayment penalty. So before making a part payment, understand its rules from your bank. Also, if you do not pay the EMI on time and only make part-payments, it has a negative impact on your credit score. This is because it shows that you are not regular with your EMIs and default.f