How a ₹50 Lakh Home Loan Can Balloon to ₹98 Lakh – And the One Step That Saves ₹13 Lakh
CA Explains Why Early Prepayment is the Key to Beating Debt Traps
Smart Borrowers Can Cut Loan Tenure and Save Lakhs in Interest
By Our Legal Reporter
New Delhi: November 24, 2025:
Buying a home is one of the biggest financial milestones for Indian families. But behind the dream of homeownership lies a hidden trap: the true cost of a home loan is often far higher than the borrowed amount. A recent analysis by Chartered Accountant Nitin Kaushik has gone viral, warning that a ₹50 lakh loan can silently swell into ₹98 lakh if borrowers stick to standard EMIs without prepayments.
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The Hidden Cost of Home Loans
Most borrowers believe that once they sign up for a loan, they simply repay the EMI every month until the loan ends. But the reality is that interest payments over 20–25 years nearly double the original loan amount. Banks calculate interest on the outstanding principal, meaning that in the early years, most of the EMI goes toward interest rather than reducing the loan balance.
Kaushik explains: “A ₹50 lakh loan at 8.5% interest over 20 years can cost nearly ₹98 lakh in total repayment. That’s almost double the borrowed amount.”
Why Prepayment Matters
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The key to breaking this cycle is early prepayment. By paying even small extra amounts in the first few years, borrowers can drastically reduce the outstanding principal. This lowers future interest and shortens the loan tenure.
- Example: Adding just ₹5,000 extra to the EMI each month can save several lakhs in interest.
- Lump-Sum Payments: Using annual bonuses or savings to make one-time prepayments can cut years off the loan.
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Kaushik stresses that early prepayment is more powerful than late prepayment. Paying extra in the first five years has a much bigger impact than doing so in the last five years.
The Debt Trap Explained
Financial planners warn that home loans are turning into silent debt traps. Borrowers often focus on low EMIs, thinking they are affordable. But low EMIs usually mean longer tenures, which increase total interest.
Banks rarely highlight this in their marketing. Relationship managers emphasize affordability but avoid discussing how much borrowers will pay in total. As a result, many families unknowingly commit to decades of debt.
Smart Borrowing Strategies
Experts recommend several strategies to avoid falling into this trap:
- Choose Shorter Tenures: Even if EMIs are higher, shorter tenures reduce total interest.
- Make Regular Prepayments: Add small amounts to EMIs or make lump-sum payments whenever possible.
- Avoid Loan Transfers Without Calculation: Shifting loans for lower EMIs may extend tenure and increase total cost.
- Track Total Repayment: Always calculate how much you will pay over the full tenure, not just the monthly EMI.
Real-Life Impact
For a middle-class family, saving ₹13 lakh through prepayment can mean funding a child’s education, buying a car, or building retirement savings. The psychological relief of cutting years off debt is equally important. Families can achieve financial freedom earlier and redirect income toward wealth creation.
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Industry Reactions
Financial advisors have welcomed Kaushik’s analysis, saying it highlights a problem that has long been ignored. “Most borrowers don’t realize they are paying nearly double the loan amount. This judgment-free awareness is crucial,” said one advisor.
Banks, however, argue that they provide all details in loan documents. Critics counter that the fine print is too complex for average borrowers and that banks should proactively educate customers.
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The Bigger Picture
India’s housing market is booming, with millions of families taking loans. But rising interest rates and long tenures mean that debt burdens are growing. The Reserve Bank of India (RBI) has urged banks to improve transparency, but experts say more needs to be done.
Kaushik’s warning is timely: as property prices rise, borrowers must be smarter about managing loans. Prepayment is not just a financial strategy—it is a path to financial independence.
Conclusion
The message is clear: a ₹50 lakh home loan can silently become ₹98 lakh if left unchecked. But by taking one simple step—early prepayment—borrowers can save ₹13 lakh or more and cut years off repayment.
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For families dreaming of homeownership, this is not just financial advice—it is a lifeline. Smart borrowing, disciplined prepayment, and awareness of the true cost of loans can turn the dream of owning a home into a reality without decades of debt.
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