Loan Prepayment Calculator
Interest and EMIs saved by making a one-time part-payment.
Before and after the prepayment
| Item | Without prepayment | With prepayment |
|---|---|---|
| Monthly EMI | ₹43,391 | ₹43,391 |
| Tenure (months) | 240 | 192 |
| Total interest | ₹54,13,879 | ₹38,10,188 |
| Interest saved | — | ₹16,03,691 |
Increase or decrease your EMI
No lump sum — just pay a higher or lower EMI every month from now on and see what it does to your tenure and total interest.
A loan prepayment is a lump sum you pay towards your outstanding principal on top of your regular EMIs. Because interest is charged on the balance, that lump sum stops earning interest for the bank immediately. Enter your loan and the amount you plan to prepay above to see exactly what it saves.
You then choose what the prepayment buys you: keep the same EMI and close the loan years early (reduce tenure), or keep the same end date and pay a smaller EMI every month (reduce EMI). Reducing the tenure almost always saves far more interest — this calculator shows both side by side.
How prepayment savings are calculated
There is no shortcut formula — the calculator amortizes the loan month by month at r = annual rate ÷ 12 ÷ 100, subtracts the lump sum from the outstanding balance in the month you make it, and then continues. In reduce-tenure mode the EMI stays put and the loan simply runs out of months sooner. In reduce-EMI mode the EMI is recomputed on the smaller balance over the months still left in the original tenure.
Take a ₹50,00,000 home loan at 8.5% for 20 years: the EMI is ₹43,391 and the total interest is ₹54,13,879. Prepay ₹5,00,000 after 12 EMIs and keep the EMI unchanged, and the loan closes in 192 months instead of 240 — 48 EMIs saved and ₹16,03,691 less interest. Choose reduce-EMI instead and the tenure stays at 240 months, the EMI drops to ₹38,964, and the saving is a much smaller ₹5,09,407.
How to use this calculator
- Enter your original loan amount, interest rate and tenure — the terms you signed up for.
- Set the prepayment amount, that is the lump sum you can actually spare (bonus, maturity proceeds, arrears).
- Pick how many years into the loan the prepayment happens — earlier always saves more.
- Toggle between Reduce tenure and Reduce EMI to compare the two outcomes.
- Open the before-and-after table to see the change in EMI, tenure and total interest in one view.
Prepayment rules in India
The RBI bars banks and NBFCs from charging foreclosure or prepayment penalties on floating-rate home and other loans taken by individuals for non-business purposes. Fixed-rate loans and most business loans can still attract a charge of 2–4% of the amount prepaid, so read the sanction letter before you transfer money.
Timing matters more than size. Interest on a reducing-balance loan is front-loaded, so ₹5 lakh prepaid in year 2 saves several times what the same ₹5 lakh saves in year 15. If you claim Section 24(b) interest deduction on a home loan, remember that a big prepayment shrinks your future interest and therefore that deduction — compare the post-tax saving against the return you would earn by investing the same money instead. Always insist on a revised amortization schedule from the lender after a part-payment, and check that the bank has applied it to principal and not to future EMIs.
Frequently asked questions
Is it better to reduce the tenure or the EMI?
Reducing the tenure saves dramatically more interest because you stop paying interest sooner, while a lower EMI keeps the loan running for the full term. In the ₹50 lakh example above, reduce-tenure saves ₹16.04 lakh against ₹5.09 lakh for reduce-EMI. Choose reduce-EMI only if your monthly cash flow is genuinely tight.
When is the best time to prepay a loan?
As early as possible. Interest is charged on the outstanding balance, which is highest in the first years, so early prepayments remove the most expensive interest. A prepayment made in the last few years of a loan barely moves the total because most of what is left is principal anyway.
Do banks charge a penalty for prepayment?
The RBI has banned prepayment and foreclosure charges on floating-rate loans given to individuals for non-business purposes, which covers most home loans. Fixed-rate loans, loans to businesses and many personal loans can still carry a charge of roughly 2–4% of the prepaid amount.
Should I prepay my home loan or invest the money?
Compare the loan rate with the after-tax return you realistically expect elsewhere. Prepaying a 9% home loan is a guaranteed, risk-free 9% return; an equity fund may beat it over 10+ years but can also fall. If you claim Section 24(b) or 80C benefits, use the effective post-tax loan rate in that comparison.
Does a part-payment change my EMI automatically?
No. Most Indian lenders keep the EMI unchanged and shorten the tenure by default, which is usually the better outcome anyway. If you want your EMI reduced instead, you must request it in writing, and some banks treat it as a loan reset with a small documentation fee.
Can I prepay a personal or car loan the same way?
Yes, the maths is identical for any reducing-balance loan. The difference is the fine print: personal and car loans often have a lock-in of 6–12 EMIs before prepayment is allowed and may levy a foreclosure charge, so confirm both before planning a lump sum.
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Disclaimer: results are estimates based on the inputs and published rules/rates, for information only — not investment, tax or legal advice. Verify important decisions with a qualified professional. See our full disclaimer.