Simple Definition
Prepayment can be partial or full. It reduces outstanding principal and may reduce total interest depending on timing and lender terms.
Why It Matters
Prepayment helps borrowers reduce debt faster and potentially save on interest.
Example
Paying an extra ₹50,000 towards a home loan principal is a partial prepayment.
FAQs on Prepayment
Is prepayment allowed?
Most lenders allow prepayment subject to product rules and applicable charges.
Should I reduce EMI or tenure after prepayment?
Reducing tenure usually saves more interest, while reducing EMI improves monthly cash flow.