To calculate the yearly part payment required to close your loan within 5 years, let's consider the following details:

• Principal Loan Amount: 1,604,776 INR
• Interest Rate: 8.7% per annum
• EMI (Equated Monthly Installment): 23,000 INR
• Desired Tenure for Closure: 5 years (or 60 months)

The method involves calculating the outstanding balance each year if you continue paying the EMI of 23,000 INR and applying an annual part payment that reduces the principal so that the loan is fully paid off in 5 years.

Step-by-Step Solution

1. Calculate Total Interest and Outstanding Balance for Each Year:

   • We'll use the reducing balance method to account for the diminishing balance after each EMI and part payment.

2. Determine Part Payment to Reduce Loan to Desired Term:

   • For each year, calculate how much additional principal must be reduced to meet the 5-year payoff target.

Let’s calculate this in detail.To close your loan within 5 years with an EMI of 23,000 INR, you would need to make the following yearly part payments:

1. Year 1: 606,273 INR
2. Year 2: 192,114 INR
3. Year 3: 39,494 INR
4. Year 4: No additional part payment needed
5. Year 5: No additional part payment needed

These part payments gradually reduce your outstanding principal, ensuring the loan is fully paid off in 5 years.

Would you like further details on any of these calculations?

Here are some follow-up questions you might consider:

1. How does a change in the EMI amount affect the part payments?
2. What would happen if the interest rate changes during the loan tenure?
3. How would closing the loan earlier than 5 years alter the required part payments?
4. What if I can make part payments more frequently than yearly?
5. What’s the impact of part payments on the overall interest saved?

Tip: Early part payments reduce your principal balance, thus significantly lowering the total interest payable over the loan’s tenure.