home loan – reduction in tenure – what does this mean….?

which one should i choose..

i wanted to go for a loan of 25 lacs with a 20 yrs tenure..
people suggest, looking at my salary, i can just go for a 10 yr tenure..

but, my thought is , i will have a less EMI contribution from my salary if i go for a 20 yr tenure.
on the other hand, people suggest that go for a 20 yrs tenure ,and any time if you make a lump sum principal payment towards your loan, the tenure gets reduced automatically? what does it mean?

2 Replies to “home loan – reduction in tenure – what does this mean….?”

  1. I think you are asking, in U.S. terms – if you make a big principal payment on a loan, does it get paid off faster? Yes it does, assuming you keep on paying the normal payments *after* you make the big principal payment.

    If you can afford to pay it off in ten years that is better as you pay much less interest. If you can’t afford it then take the 20-year term. If you are somewhere in between, then take the 20-year term and whenever you can pay extra, pay extra. You will pay less interest and reduce the loan term.

    This is all assuming there is nothing in the loan agreement that penalizes you for paying it off early or making payments above the scheduled payments.

  2. it is not like that if you pay lumpsum ofcourse the balance will be reduced and also it will not last long the 120th instalment but the tenure will not be reduced from 120 months to 100 months or like that

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