Loan Prepayment Calculator
Interest saved by paying off early
Side-by-side comparison
| Item | Without prepaying | After prepaying | Difference |
|---|---|---|---|
| Monthly EMI | ₹36,836 | ₹36,836 | ₹0 |
| Tenure | 18 yrs | 13 yrs 7 mo | − 4 yrs 5 mo |
| Total interest | ₹39,56,493 | ₹24,84,596 | − ₹14,71,897 |
Understand the result
About the Loan Prepayment Calculator
What is loan prepayment?
A prepayment — or part-payment — is money you pay towards a loan over and above your regular EMIs. The whole amount reduces the outstanding principal, so you stop paying interest on it for the rest of the loan. Afterwards the lender either keeps your EMI and shortens the tenure, or keeps the tenure and lowers the EMI.
This loan prepayment calculator shows the interest you save, the new tenure or EMI, and the effective return you earn on the money you prepay, for a one-time lumpsum, a regular extra monthly payment, or both.
How this calculator works
A prepayment goes entirely against principal. Because interest each month is charged on the outstanding balance, every rupee you prepay stops accruing interest for the whole remaining tenure — which is why prepaying early in a loan saves so much more than prepaying late.
You then choose what to do with the headroom. Reducing the tenure keeps your EMI the same and finishes the loan sooner; reducing the EMI keeps the end date and lowers the monthly outgo. Reducing the tenure almost always saves more interest, because the balance falls faster. Reducing the EMI helps cash flow instead.
The return-on-prepayment figure is the one to judge this by. It tells you the interest saved per rupee prepaid — the effective, guaranteed, tax-free return you earn by paying down debt. Compare it against what the same money would earn invested, after tax.
A small extra amount every month is often more powerful than people expect, because it acts on every remaining month of the loan rather than once.
Where the lender charges a prepayment fee, it is deducted from the amount you hand over rather than added on top — so a ₹5,00,000 prepayment at a 2% charge only takes ₹4,90,000 off your balance. The fee reduces both the interest saved and the return on the money, which is why the calculator shows the split.
Formula
Prepayment fee = lump sum × fee % Applied to principal = lump sum − prepayment fee Each month: interest = balance × (annual rate ÷ 12) principal = EMI − interest balance = balance − principal The balance falls by the amount applied to principal, so every subsequent month's interest is computed on less. The fee buys nothing — it is pure cost.
Worked example
- ₹40,00,000 outstanding at 8.75% with 18 years left. The EMI is about ₹36,700.
- Prepay ₹5,00,000 today and keep paying the same EMI.
- The loan finishes roughly 4 years early and saves close to ₹15 lakh in interest — a return of about 300% on the amount prepaid.
Earlier prepayments save far more
| Tenure remaining when you prepay | Interest saved | Loan ends earlier by |
|---|---|---|
| 18 years | ₹14,71,897 | 4 years 5 months |
| 12 years | ₹7,85,308 | 2 years 4 months |
| 6 years | ₹3,12,224 | 11 months |
The same ₹5 lakh saves almost five times as much interest when there are 18 years left as when there are 6. If you plan to prepay, do it as early in the loan as you can.
Prepayment rules by loan type
- Floating-rate loans to individuals (most home loans): RBI rules prohibit prepayment or foreclosure charges.
- Fixed-rate loans (most personal, car and bike loans): lenders may charge a fee, often 2%–5% of the amount prepaid or outstanding, and may require a minimum number of EMIs first.
- Some lenders limit how many part-payments you can make a year or set a minimum amount per part-payment.
- Always ask for a revised repayment schedule after a prepayment and check which option — lower tenure or lower EMI — has been applied.
Assumptions & important notes
What this calculator assumes
- The interest rate stays fixed for the remaining tenure. On a floating-rate loan the actual saving will differ as the rate moves.
- The prepayment is applied immediately and in full against principal.
- The prepayment fee is treated as a percentage of the lump sum, deducted from it. Some lenders instead charge on the outstanding principal, or add GST on top of the fee — check your sanction letter and adjust the percentage to match.
- Any tax deduction you were claiming on the interest is not adjusted for — see the notes.
Important notes
- The RBI prohibits prepayment penalties on floating-rate home loans taken by individuals — leave the fee at 0 for those. Fixed-rate loans, and most personal and business loans, may still carry a charge of 2–4%, usually plus 18% GST on the fee itself.
- If you claim the section 24(b) deduction of up to ₹2 lakh on home loan interest under the old regime, prepaying reduces that benefit. Your effective saving is lower than the headline figure by roughly your marginal tax rate.
- Prepay the most expensive debt first. Credit cards and personal loans at 14–45% should be cleared long before a home loan at 9%.
- Keep an emergency fund intact before prepaying. Money put into a loan is very hard to get back out.
Frequently asked questions
Should I reduce the tenure or the EMI?
Reduce the tenure if you can afford the current EMI — it saves substantially more interest because the balance falls faster. Reduce the EMI only if you need the monthly cash flow.
Is prepaying better than investing the money?
Compare the return-on-prepayment figure above against your expected post-tax investment return. Prepaying a 9% loan is a guaranteed, risk-free 9%; beating that reliably after tax is harder than it sounds. But prepayment is irreversible, whereas investments stay accessible.
When is the best time to prepay?
As early as possible. In the first years of a loan most of each EMI is interest, so a prepayment then removes far more future interest than the same amount paid in the final years.
Will the bank charge me for prepaying?
Not on a floating-rate home loan taken by an individual — the RBI prohibits it. Fixed-rate home loans, personal loans and business loans may carry a charge, typically 2–4% of the amount prepaid.
How much cash should I keep before prepaying?
Keep an emergency fund of at least six months of expenses, including EMIs, in liquid form. Money paid into a loan cannot easily be taken back if you lose your job or face a medical emergency.
PaiseWise runs entirely in your browser — the figures you enter are never sent anywhere. Results are estimates for planning only, not financial, tax or investment advice.