The idea behind taking any flexible product should be how it's going to allow a borrower to pay their loan off early through options for bringing down the balance more quickly. The reason a borrower should want to pay a loan off as early as possible, is that the earlier they pay it off, the more money they will save. By way of example, let's say a client has taken a variable 'principal and interest' loan for $150,000 over a term of 25 years. Let's also say that their interest rate was 6.50%, and that through some wonderful chain of events, their interest rate didn't change during the entire term of the loan.

Upon their 300th payment, which would be the last payment they make after 25 years of mortgage they would have paid $150,000 back of the principal, and approximately a total of $153,843 in interest. Lets say now, that they took less time, and managed to pay back the loan in say 20 years. After paying back the original amount of $150,000, they would have paid approx $118,406 in interest, which would be a saving of approx $37,437 in interest repayments. To take that even further, let's say they only took 10 years to pay off their mortgage. On top of their initial borrowed amount of $150,000, they would only have had to pay back approx $54,487 in interest, which would be a saving of approx $99,356 than if they had taken the full 25 years to pay back the loan. Put simply, the sooner a borrower can pay a loan off, the more they will save in interest.

The basic concept for putting more into a loan to pay it off quickly is simple. If interest rates didn't change, neither would the repayments. The only thing that would change is the relationship between the Principal portion of the repayment, and the Interest portion of the repayment. When a borrower begins repaying a loan, a very small portion of each repayment is paying down the principal of the loan, while the vast majority is servicing the interest that's been calculated on the balance of the loan. This means that as borrowers pay more and more off the loan, the interest portion of the payment will be less as the interest has been calculated on a lesser amount, which also means that the principal portion of the repayment will be greater. This means that a borrower will be paying more off the principal amount with each repayment. Don't forget, repayment amounts are calculated at repaying the loan over 25 years. By owing less, interest being calculated is less, which means that each repayment is paying more off the principal, and thus reducing the balance that is owed.