QUESTION: What is more profitable: reducing the loan term or the monthly payment during early repayment?

The choice between reducing the loan term and lowering the monthly payment during early repayment depends on your current financial situation and long-term goals. From the perspective of pure mathematics and money saving, it is often more profitable to reduce the loan term. In this case, the total interest over the entire period of using borrowed funds will be significantly lower because the principal is reduced faster, and interest is accrued on a smaller remaining balance. For example, with a 20-year mortgage, early payments of even small amounts with a shortened term can save hundreds of thousands or even millions of rubles.

On the other hand, the strategy of reducing the monthly payment has its important advantages. This option is optimal if you face financial instability in your life, fear job loss, or anticipate a drop in income. Reducing the mandatory payment lowers your debt burden and creates a certain liquidity cushion in your family budget, which makes monthly loan servicing easier.

To make an informed decision, it is recommended to analyze your priorities before each payment. Many modern banks in mobile apps allow you to clearly see the difference between these two scenarios before confirming the transaction.

You can also combine both approaches throughout the entire loan term. For example, during periods of financial stability, direct money toward reducing the term, and in case of risks, switch to lowering the payments.