Should You Prepay Your Loan? A Complete Decision Guide

Loan prepayment can save significant interest, but it is not always the best financial decision. Here is how to evaluate whether prepayment is right for you.

When to Prepay Your Loan

• High-interest loans (above 10%): Always worth prepaying
• Near the end of tenure: Most interest is already paid, prepayment helps less
• Early in tenure: Prepayment saves maximum interest
• If you have no higher-return investment opportunity
• When you have an emergency fund already in place

Prepayment Penalties

Some lenders charge 2-5% prepayment penalty on the outstanding amount. Check your loan agreement and factor this cost into your decision.

Calculate your potential savings with our EMI Calculator.