What is curtailment on a loan?

Curtailment on a loan refers to making an extra payment towards the principal balance of the loan, resulting in the reduction of the total loan amount. This can help borrowers save on interest costs and pay off the loan faster.

However, it's important to note that not all loans allow for curtailment. Some loans may have prepayment penalties or restrictions on making additional payments. It's also essential to check with the lender to ensure that any curtailment payment is applied correctly to the principal balance and not towards future payments.

Before making a curtailment payment, borrowers should consider their financial situation and goals to determine if it's the right decision for them. It's advisable to consult with a financial advisor or lender to fully understand the implications of making a curtailment on a loan.