If you have an active loan (personal loan, car or real estate financing), you've likely wondered if you should use extra income to prepay installments. The answer is almost always yes. Prepayment is a powerful tool to save heavily on compounded interest and achieve debt freedom years ahead of schedule. By law, consumers have the right to a proportional interest discount when prepaying. When doing so, you generally face two choices: reduce the monthly installment value, or reduce the contract's timeframe. Reducing the timeframe is highly recommended, as it mathematically guarantees the largest interest discount by eliminating the time available for compound interest to grow. Always request the 'amortization by term reduction' option via your banking app.
