Loans & EMI
Loan Prepayment
See what a lump sum or an extra monthly payment saves you in interest, and how much sooner the loan ends
About the Loan Prepayment calculator
Work out exactly what a lump-sum prepayment saves you. See interest saved, months shaved off the tenure, and whether reducing the EMI or the term is the better use of the money.
How the maths works
Prepayment Impact
Interest saved = Interest(original schedule) - Interest(schedule after prepayment)- Outstanding principal
- What you still owe today, not the amount originally borrowed
- Prepayment
- The lump sum applied directly against principal
- R
- Monthly interest rate (annual rate divided by 12, then by 100)
- N remaining
- Months left on the current schedule
- Reduce tenure
- EMI stays the same and the loan ends sooner - this saves the most interest
- Reduce EMI
- Tenure stays the same and the monthly payment falls - this improves cash flow
A worked example
Prepaying a home loan in year 4
| Outstanding principal | ₹42,00,000 |
| Interest rate | 8.5% per annum |
| Months remaining | 192 (16 years) |
| Prepayment | ₹5,00,000 |
Keeping the EMI unchanged saves roughly ₹14.5 lakh of interest and cuts about 34 months from the loan. Switching to a lower EMI instead saves closer to ₹5.6 lakh.
How to use it
- Enter the outstanding principal, not the original loan amount
- Enter the current interest rate and the months remaining
- Enter the lump sum you plan to prepay and when
- Choose whether to keep the EMI and cut the tenure, or keep the tenure and cut the EMI
- Compare the interest saved against what the same money would earn if invested instead
What it accounts for
- Interest saved in rupees, not just a percentage
- Months removed from the remaining tenure
- Side-by-side comparison of reducing tenure against reducing EMI
- Handles multiple prepayments across the life of the loan
- Accounts for prepayment charges where a lender levies them
Why it is worth working out
- Shows whether prepaying beats investing the same amount
- Makes the tenure-versus-EMI decision concrete instead of theoretical
- Reveals how much more an early prepayment is worth than a late one
- Helps time a bonus or windfall for maximum effect
Questions people ask
Should I reduce the EMI or the tenure?
Reduce the tenure if you can afford the current EMI — it is dramatically cheaper. On a ₹42 lakh balance at 8.5%, a ₹5 lakh prepayment saves about ₹14.5 lakh in interest if you keep the EMI, against roughly ₹5.6 lakh if you lower it. Lower the EMI only when cash flow genuinely needs the relief.
When is the best time to prepay?
As early as possible. Interest is charged on the outstanding balance, so a rupee prepaid in year three removes interest for every remaining year; the same rupee in year eighteen removes almost nothing. If you have a lump sum and intend to prepay at all, do not wait for a round number.
Is prepaying better than investing the money?
Compare the loan rate against the after-tax return you would realistically get, not the return you hope for. Prepaying a loan at 8.5% is a guaranteed, risk-free, tax-free 8.5%. Beating that reliably requires equity and a long horizon. Prepay high-rate debt always; for a cheap home loan it is genuinely a close call.
Will the bank charge me for prepaying?
On a floating-rate home loan to an individual, no — the RBI prohibits foreclosure and prepayment charges on those. Fixed-rate loans, and loans to non-individuals, can and usually do carry a penalty of 2% to 4%. Check which category your loan is in before transferring anything.
Read more on this
- Home loan balance transfer: when the rate cut is real and when it is a mirage — Switching your home loan to a lower rate saves lakhs — but only if the remaining tenure is long enough and the transfer costs do not eat the saving. The breakeven calculation most people skip.
This calculator is for information and education. It is not financial advice — see the disclaimer.