PayLoanEarly Resource

RD vs Loan Prepayment for a Safer Early Closure Plan

A recurring deposit can help build a predictable closure corpus while direct prepayment reduces principal immediately.

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Why RD feels safer

RD returns are generally steadier than market-linked SIP assumptions, making them easier for conservative borrowers to plan around.

Hybrid strategy

A borrower can pay one extra EMI every year and run an RD for the final closure amount. This balances lender prepayment with cash discipline.

Frequently Asked Questions

Is RD better than prepayment?

If the loan rate is higher than the RD return, direct prepayment often saves more. RD may still help when liquidity and predictability matter.

Can annual bonuses reduce loan tenure?

Yes. Applying bonuses as part-payments can reduce principal and shorten tenure, especially in the early years of a loan.