One strategy that can help a borrower reduce the cost of a loan is to make extra payments toward the principal balance whenever possible. Here's how it works:

  1. Principal Reduction: When you make extra payments toward the principal balance of your loan, you're reducing the amount of money on which interest accrues over time.

  2. Interest Savings: By reducing the principal balance, you'll pay less in interest over the life of the loan. This can result in significant savings, especially on long-term loans like mortgages.

  3. Shortened Loan Term: Making extra payments can also shorten the overall term of the loan. This means you'll pay off the loan faster and pay less total interest.

  4. Accelerated Payment Schedule: Some borrowers choose to make extra payments on a regular basis, such as bi-weekly or monthly, to accelerate the payoff process further.

  5. Flexibility: Extra payments are typically applied directly to the principal balance, so you have the flexibility to pay more when you can afford it without being locked into a specific payment schedule.

Before making extra payments, it's essential to check with your lender to ensure there are no prepayment penalties and that the additional payments will be applied correctly to the principal balance. By implementing this strategy, borrowers can save money and pay off their loans more quickly.