On a Rs 40 lakh loan at 8.5%, monthly interest starts at about Rs 28,333. A lower instalment may leave the balance growing, while a higher EMI or later part-payments can cut the overall cost.
A monthly home loan payment that looks manageable on paper can carry a much larger cost over time. A borrower who chooses a smaller equated monthly instalment may preserve short-term cash flow, but the trade-off is usually a longer repayment period and more interest paid to the lender.
According to NDTV’s example, a Rs 40 lakh home loan at an annual interest rate of 8.5% would generate roughly Rs 28,333 in interest alone in the first month. Under those assumptions, a Rs 25,000 instalment would not even meet the month’s interest bill, which means the outstanding balance would rise rather than fall. By contrast, a Rs 40,000 instalment would at least begin reducing the principal, helping the borrower move towards full repayment.
Munish Jain, chief business officer for home loans at Capri Loans, told NDTV that the right instalment depends on the loan size, the interest rate and how much room the household has in its monthly budget. ICICI Bank’s home loan calculator guidance echoes that point, saying the size of an EMI is driven by the principal, the rate of interest and the tenure. Its materials also note the basic rule of home loan repayment: a shorter tenure generally means higher monthly payments but lower overall interest, while a longer tenure eases the monthly burden at the cost of a larger total outgo.
That basic structure matters because home loans are typically amortised, meaning each payment is split between interest and principal. Early in the loan, interest takes a larger share of each instalment, so reducing the balance faster can save money later. ICICI Home Finance explains that prepayments work for the same reason: they cut the principal on which future interest is calculated, which can reduce the loan term and trim the interest bill.
Still, a larger EMI is not always the wisest choice. Jain cautioned that borrowers should think about job stability, other debts, emergency savings and future goals before stretching for the maximum possible payment. A household that commits too much of its income to one loan can become vulnerable if earnings fall or an unexpected expense arrives.
For many borrowers, a balanced approach is more sensible. ICICI Bank recommends comparing different tenure and instalment combinations before settling on a repayment plan, while the Reserve Bank of India has said banks may not levy foreclosure charges or prepayment penalties on floating-rate home loans. That makes it easier for borrowers to start with an affordable EMI and then use salary increases, bonuses or other windfalls to make part-payments. Used carefully, that approach can protect day-to-day finances while still bringing the loan down faster.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
