POSTED BY January 1, 2013 4:33 pm COMMENTS (5)ON
I have a housing loan with Syndicate Bank. I have made it a practice to make pre-payments at regular intervals to save on interest amount. The bank deductes EMI amount on 31st of every month (~₹14k). However if I make an advance payment (be it through NEFT or visit to the bank) the situation is different:
In my opinion the advance payments must be considered separate and EMI deduction must happen in addition to the advance amount I had made. On enquiry bank officials informed me that my interest component gets reduced as the amount remitted will automatically reduce the outstanding loan amount.
Are the bank officials right in saying that interest component would go down accordingly? I would like to know what is the practice followed by other banks before taking the matter further. Do they deduct EMIs despite of advance payments?