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Should you prepay your loan early? Expert weighs in on interest savings, EMIs and future borrowing
Mint 1 hr ago·12 Sept 2026, 4:05 am
Prepaying a loan can be a smart financial move if you have surplus funds. By paying off a portion of the principal early, you reduce the total interest you pay over time. This can also help you become debt-free sooner. However, it is important to check if your loan agreement has any prepayment penalties or processing fees. These charges might offset the interest savings you expect to make.
For investors, this decision is about balancing liquidity with long-term savings. Using savings to prepay a high-interest loan can be more beneficial than keeping money in a low-return fixed deposit. On the other hand, if you have other investments that offer better returns, you might want to keep the money invested instead.
What to watch next: Before making a decision, compare the interest rate of your loan with the returns you can get from your investments. Also, consider your future financial goals and your ability to handle an emergency without dipping into your savings.
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