# Is that possible to negotiate to change the monthly interest amount deduction?

#1

Hi ,

I am gonna to take a loan. But the bank guy has given that xx.xx% and also he has given the table like below

Ex. first month payment 10,960 – 1000 + 9960(Interest)
2 month payment 10,960 – less than 2k + 8k above (Interest)
3 month payment 10,960 – less than 2k+ 8k above (Interest)
4 month payment 10,960 – less than 2k+ 8k above (Interest)
5 month payment 10,960 – less than 2k+ 8k above (Interest)
6 month payment 10,960 – less than 2k+ 8k above (Interest)
7 month payment 10,960 – less than 2k+ 8k above (Interest)
8 month payment 10,960 – less than 2k+ 8 above (Interest)

Question :

I don’t want to pay more interest on first 1 year. is that possible to change ?

#2

Your interest is charged on the principal outstanding. Hence when you take loan and pay the first EMI, the interest is charged on the total amount of loan. As you pay your EMI, which includes part payment towards your interest and part payment towards your principal, your principal reduces which reduces your interest flow.

Since the EMI is fixed, lowering of interest component means your payment towards principal is increasing which further reduces your interest obligation.

For example, suppose you have taken 10 lakhs loan, your first EMI will calculate our interest on 10 lakhs. Suppose the first EMI is 20,000 out of which 15,000 is interest and 5,000 is principal, the next EMI will calculate interest portion on 9,95,000 (i.e. 10 lakhs – 5000).

So in my view, you cannot change it.

#3

very gud article

#4

Hi Selvi,

If you have opted for a Home Loan, check if there is a pre-EMI option. Pre-EMI is the payment of interest applicable on the loan and not the principal. This amount is paid in the period during which the house/ building is being constructed. It ends once the construction is completed. Pre-EMI amount is lesser than full EMI amount since only the interest portion is paid out and the principal loan amount remains intact.

Those who wish to save money during the pre-EMI period can go for pre-EMI. The opportunity cost of the money that would have to be paid as full EMI and that which could be accumulated and invested in a good savings scheme will help determine which repayment option to choose. For example, suppose the full EMI payment is Rs. 25,000 out of which the interest contribution is Rs. 5,000. By choosing to pay pre-EMI only, i.e., Rs. 5,000 interest only, the borrower can invest the remaining Rs. 20,000 elsewhere and earn consistent returns. This can be accrued to pay the EMI at a later stage.

The pre-EMI option is also ideal for property investors who wish to sell the property once construction is completed. Those who are waiting for a change in income capacity or cannot afford to pay full EMI at the moment will find pre-EMI payment to be the best option.

Full EMI repayment of a Home Loan is the payment of principal as well as interest. This payment begins once the construction of the house/ building is completed. Some banks also permit commencement of full EMI payment while the loan amount is being disbursed in stages. By paying the full EMI, the interest is repaid and the outstanding loan amount will be reduced during the loan period.