Loan repayment strategy 25 year loan to 10 years

In this article, we will understand how you can repay a long-term loan—such as a 125-month loan—in just 10 years without taking unnecessary risk or creating financial pressure. It may sound unusual, but the method is very simple, disciplined, and extremely effective.

In this article, we will understand three things.
First, when we pay EMI every month, what is the structure? How does EMI work? How does it repay our loan? How does it cover interest?
Second, we will see if you take a loan for 5 years, 10 years, or 25 years, how your monthly EMI affects the loan and how interest is controlled.
Third, we will understand which disciplined methods help us reduce the overall loan duration without taking additional risk or pressure.

Understanding How EMI Works

Whenever we take a loan, we usually look at the EMI amount and assume that maybe half of the EMI goes toward the principal and the remaining toward interest. For example, if EMI is Rs. 15,000, we may think around Rs. 7,500 goes toward the loan and Rs. 7,500 goes toward the interest.

But the truth is completely different.

In the beginning, a large portion of your EMI goes ONLY toward paying interest. This is the most shocking thing, and many people don’t realize this. It feels like the loan is reducing fast, but actually, in the beginning, you are mostly paying interest.

To understand this, let’s look at an example. In the Excel sheet, I have taken a loan amount of Rs. 40 lakhs at an 8% interest rate for a duration of 25 years. Based on these inputs, EMI becomes around Rs. 31,000 per month.

But here’s the surprising part —
You borrowed Rs. 40 lakhs, but your total interest payable will be around Rs. 52 lakhs.
You pay MORE interest than the actual loan amount.

This is why the first step of a good loan repayment strategy is to reduce the loan tenure.

Effect of Reducing Loan Tenure

Let’s compare 25 years and 15 years.

Loan Amount: Rs. 40 Lakhs
Interest Rate: 8%

If the loan duration is 25 years, total interest paid = Rs. 52 lakhs.
If the loan duration is 15 years, total interest paid = Rs. 28 lakhs.

You save Rs. 14 lakhs simply by choosing a shorter tenure.

All with just Rs. 8,000 extra EMI.

This is how powerful a smart loan repayment strategy can be.

How EMI Is Distributed in the Early Months

Let’s see Month 1.
EMI: Rs. 31,000
Interest portion: Rs. 27,000
Principal portion: Rs. 4,000

So even though you paid Rs. 31,000, your loan reduced by only Rs. 4,000.

When you do this for a full year:
After 12 months, your EMI principal portion increases slightly from Rs. 4,000 to around Rs. 4,500.
Interest slightly reduces from Rs. 27,000 to Rs. 26,000.

Even after paying Rs. 3.7 lakhs in a year, the loan reduces by less than Rs. 50,000.

This is shocking but true.
In the early years, EMI goes mostly toward interest.

That’s why using a strong loan repayment strategy is important.

Example: Car Loan EMI Structure

Loan: Rs. 6 lakhs
Interest: 10%
Tenure: 3 years
EMI: Around Rs. 19,000
Total interest: Rs. 90,000

Since the tenure is short, EMI distribution immediately shifts more toward principal.

But if the same loan is taken for 20 years, EMI becomes small, but 80–90% EMI goes toward interest in early years.

This shows shorter tenures save massive interest.

How to Convert a 25-Year Loan Into a 10-Year Loan

Now let’s understand the main part — the loan repayment strategy that helps you convert a 25-year loan to 10 years.

You can do this with TWO simple discipline-based methods:

METHOD 1: Pay One Extra EMI Every Year

This is VERY powerful.

If you add just one extra EMI every year —
Your 25-year loan reduces to around 20 years.

Why does this work?

Because the entire extra EMI directly reduces principal, as it is considered prepayment.

If your loan principal reduces, your future interest also reduces.

Even one extra EMI per year will save lakhs.

METHOD 2: Increase Your EMI by 5% Every Year

This is the strongest strategy.

Let’s assume EMI is Rs. 31,000.
Increasing by 5% means next year EMI becomes around Rs. 32,600.

You continue increasing like this every year.

With this technique:
Loan duration: 25 years → 12–14 years
Interest saved: 22–25 lakhs

Even a simple annual EMI increase makes your loan repayment strategy extremely powerful.

Combining Both Methods

If you give one extra EMI every year AND increase EMI by 5% yearly—
Your 25-year loan completes in 10–12 years.

This is how you turn a long loan into a short one without pressure.

Practical Benefits of This Strategy

Your financial burden reduces.
Interest payout reduces drastically.
You complete your biggest loans much earlier.
You save money for investments sooner.
You protect yourself from long-term debt traps.

This is why everyone should follow a disciplined loan repayment strategy.

Conclusion

I have personally taken home loans and education loans, and I realized repaying them early gives massive freedom.
Please do not repeat the mistakes I made.
Use these two techniques — extra EMI every year and 5% EMI increase — and you can repay huge loans very fast.

If you want the Excel sheet used in this explanation, comment below and I will share it.