Why early prepayments save more
Loan amortization front-loads interest. Every extra payment you make earlier reduces the principal sooner, shrinking the interest portion in all following EMIs. That’s why ₹1,000 extra in month 6 saves more than the same ₹1,000 in year 6.
Monthly extra vs. lump-sum
If your cash flow supports it, a small monthly extra is easy to automate and builds discipline. Lump-sums from bonuses or refunds are powerful too—especially if applied early. Many people combine both: a small recurring extra plus occasional lump-sums.
Timing prepayments
Earlier beats later. If your lender calculates interest daily, prepay right after EMI posting so more of the next cycle hits the smaller principal. Review prepayment charges and ask if reducing tenure (instead of EMI) is supported—this typically maximizes interest savings.
Simulate with calculators
Try this: simulate your loan with monthly extras vs. a lump-sum and compare total interest.
Guardrails and gotchas
- Keep 1–3 months of buffer before automating extra payments.
- Check prepayment fees; prefer reducing tenure rather than EMI where allowed.
- Compare loan rate vs. post-tax investment returns before large prepayments.