Part period interest is a term used in the context of loans, particularly home loans, and refers to the interest charged by the lender for the days from the date of disbursement of the loan to the date when the EMI (Equated Monthly Installment) starts. It is also known as broken period interest. This interest is charged because the borrower has received the loan amount but has not started paying the EMI yet. The interest charged during this period is calculated based on the number of days between the disbursement date and the EMI start date.
It is important to note that part period interest is different from periodic interest rate, which is the rate charged or paid on a loan or realized on an investment over a specified period of time. Periodic interest rate is calculated based on the number of compounding periods, and lenders typically quote interest rates on an annual basis, but the interest compounds more frequently than annually in most cases.
To avoid part period interest in SBI home loan, one can choose to start the EMI from the month immediately following the month in which the loan is disbursed.
