See how much interest you save and how many years you cut off your loan tenure by making extra monthly or lump-sum prepayments.
| Scenario | Tenure | Total Interest | Total Payment |
|---|
During the initial years of a long-term loan (like a home loan), a huge portion of your monthly EMI goes towards paying interest rather than the principal amount.
When you make an extra prepayment, 100% of that extra money goes directly toward reducing your principal balance. This instantly slashes future compounding interest and shortens your overall loan tenure significantly.
Reducing tenure almost always saves significantly more interest than reducing monthly EMI amount.
In India, RBI prohibits banks from charging prepayment penalties on floating-rate home loans for individual borrowers.
Prepaying earlier in the loan tenure yields maximum interest savings because the outstanding principal balance is highest.
Yes, combining a small extra monthly contribution with occasional lump-sum bonuses speeds up debt freedom even faster.