Prepayment is the repayment of a loan partially or fully before its scheduled tenure.
Detailed Explanation
Loan prepayment allows borrowers to pay extra amounts toward the principal before the loan tenure ends. Prepayment helps reduce interest burden and loan tenure. Some banks may charge prepayment penalties, especially on fixed-rate loans.
Example
"Paying ₹1,00,000 extra toward a home loan principal is considered prepayment."