Loan Prepayment Calculator
Calculate the interest saved by making a one-time, yearly or monthly prepayment on your loan, and choose between a shorter tenure or a lower EMI.
What is the Loan Prepayment Calculator?
A prepayment (part payment) reduces your outstanding principal ahead of schedule. Because interest is charged on the outstanding balance, every rupee prepaid early saves interest for the rest of the tenure.
How does it work?
The calculator builds two month-by-month schedules — with and without prepayment — and compares the total interest. You can keep the EMI and finish sooner (reduce tenure), or keep the tenure and lower the EMI.
Formula
Interest saved = Interest (original schedule) − Interest (schedule with prepayments)
Example
On a ₹50 lakh, 8.5%, 20-year loan, prepaying ₹5 lakh in month 12 and keeping the EMI saves about ₹16 lakh of interest and closes the loan 4 years earlier (192 months instead of 240).
How prepayment saves interest
Interest on a loan is charged each month on the outstanding principal. A prepayment reduces that principal immediately, so every future month’s interest is calculated on a smaller balance. The earlier in the loan you prepay, the more months of interest you avoid.
After a prepayment, the lender either keeps your EMI the same and shortens the loan (reduce tenure) or recalculates a lower EMI over the remaining term (reduce EMI). The calculator shows both.
Example: ₹50 lakh home loan at 8.5% for 20 years
Without prepayments, the EMI is ₹43,391 and total interest is about ₹54.14 lakh. Here is what different prepayment plans save.
| Plan | Option | Loan ends after | Interest saved |
|---|
| ₹5 lakh once, in month 36 | Reduce tenure | 16 years 7 months | ₹13.2 lakh |
| ₹5 lakh once, in month 36 | Reduce EMI to ₹38,750 | 20 years | ₹4.5 lakh |
| ₹2 lakh every year | Reduce tenure | 11 years | ₹27.0 lakh |
| ₹2 lakh every year | Reduce EMI | About 17 years | ₹18.7 lakh |
Reduce tenure usually saves more
With reduce tenure you keep paying the original EMI on a smaller balance, so more of every EMI goes to principal and the loan closes years earlier. With reduce EMI the benefit is spread across a lower EMI for the full term, so interest keeps accruing for longer.
Choose reduce EMI when cash flow matters more than total cost, for example if income is uncertain or the EMI is a large share of your pay.
Before you prepay
- Keep an emergency fund of at least six months’ expenses; money used to prepay a loan is hard to get back.
- Repay costlier debt first, such as credit card balances and personal loans.
- Check charges. Under RBI rules, floating-rate loans to individuals for non-business purposes carry no prepayment penalty. Fixed-rate and business loans may.
- Compare the loan rate with what the money would earn after tax elsewhere. Prepaying a 9% loan is a guaranteed 9% return.
- In the old tax regime, consider the home loan interest deduction under Section 24(b), which lowers the effective cost of the loan.
Frequently asked questions
Reduce tenure or reduce EMI — which is better?
Reducing tenure saves more interest. Reducing EMI improves monthly cash flow. If the EMI is already comfortable, choose reduce tenure.
Are there prepayment charges?
RBI rules do not allow foreclosure or prepayment penalties on floating-rate loans to individuals. Fixed-rate loans may carry charges.
Is a part-prepayment the same as foreclosure?
No. A part-prepayment reduces the principal while the loan continues. Foreclosure repays the entire outstanding amount and closes the loan.
Will the bank automatically reduce my tenure?
Practice varies by lender. Many default to reducing the tenure, while others reduce the EMI. State your choice in writing when you make the payment and check the revised schedule.
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