Master these terms to interpret every extra payment scenario accurately.
Surplus EMI
The additional amount you add to each EMI. For example, paying ₹6,000 extra on a ₹25,000 EMI accelerates principal repayment and reduces interest dramatically. It acts like a turbocharger for your loan.
Lump-sum prepayment
A one-time deposit such as a bonus or tax refund. A ₹200,000 lump sum in year two can cut a 15-year home loan by more than two years. It is a major milestone in debt reduction.
Amortisation schedule
The month-wise breakdown of principal and interest. Reviewing the updated schedule shows how extra payments reorder the remaining EMIs, giving you a roadmap to freedom.
Net interest saved
The difference between total interest in the baseline and prepayment scenarios after deducting penalties. It reveals the real benefit of each strategy, filtering out the noise.
Breakeven month
The point where interest saved exceeds the cost of penalties or lost investment returns. Knowing this helps you justify surplus EMIs and stay committed.
Prepayment penalty
The fee charged on extra principal payments. Entering the correct rate prevents overstating savings. Always check your loan agreement for this clause.
Floating rate reset
Periodic interest changes based on MCLR or repo-linked benchmarks. Updating the rate keeps projections aligned with lender notices, ensuring your plan stays relevant.
Tenure reduction
The number of months shaved off your loan. Seeing this metric motivates consistent surplus EMIs. It is the countdown clock to your financial independence.
Cash flow buffer
The amount of emergency savings you retain after making prepayments. Maintaining a buffer ensures extra EMIs never trigger liquidity stress. Safety first.
Opportunity cost
The potential return you give up by prepaying instead of investing. Comparing this with net interest saved confirms whether the strategy is worthwhile. It is the "what if" analysis.