Loan Prepayment Calculator
See how much interest you save by paying part of your home, car or personal loan early, and compare cutting the tenure with lowering the EMI. Enter your loan, your rate and the amount you want to prepay.
Prepaying ₹2,00,000 saves ₹6,22,877 if you keep paying ₹26,035 a month, or ₹1,91,158 if you ask the lender to lower the EMI instead. Cutting the tenure saves more because the extra money stops interest for every remaining year.
Assumes the rate stays the same for the whole loan. Floating rates change with the RBI repo rate. Check your loan agreement for any prepayment charge.
What is a loan prepayment?
A prepayment (or part-payment) is money you pay towards a loan on top of your EMI. It goes straight to the principal, so every month after it you pay interest on a smaller balance. Paying off the whole loan early is called foreclosure.
How the saving is calculated
The calculator runs your loan month by month. Each month, interest = outstanding balance × rate ÷ 12, and the rest of the EMI reduces the balance. In the prepayment month the extra amount comes off the balance too. The saving is the interest you no longer pay.
Worked example
₹30 lakh home loan at 8.5% for 20 years (EMI ₹26,035). After 2 years you prepay ₹2 lakh:
- Interest without prepayment: about ₹32.48 lakh
- Keep the EMI, cut the tenure: you save about ₹6.23 lakh and finish 31 months (2 years 7 months) early
- Keep the tenure, lower the EMI: the EMI falls to about ₹24,224 and you save about ₹1.91 lakh
Reduce the tenure or the EMI?
Cutting the tenure almost always saves more interest, because the money keeps working against the loan for every remaining year. Lowering the EMI makes sense if your monthly budget is tight or your income is uncertain. Lenders usually keep the EMI and cut the tenure unless you ask otherwise, so tell them which you want when you prepay.
When prepaying pays off most
- Early in the loan. Most of each EMI is interest in the first years, so a rupee prepaid then saves the most.
- When the rate is high. Prepaying a 10% loan is a guaranteed 10% return; compare it with what your savings earn after tax.
- Not at the cost of your emergency fund. Keep 6 months of expenses aside before prepaying.
Prepayment charges
RBI rules do not allow banks and NBFCs to charge a prepayment or foreclosure penalty on floating-rate loans taken by individuals for purposes other than business. Fixed-rate loans, including many personal and car loans, can carry a charge. Your Key Fact Statement lists it.
When to use a different calculator
- Working out your current EMI? Use the Home Loan EMI Calculator.
- Deciding between prepaying and investing? Read EMI vs SIP: Prepay or Invest?
- Comparing a balance-transfer offer? Use the Loan Comparison Calculator.
