Loan Prepayment Calculator

About the Loan Prepayment Calculator

Prepayment means paying more than your scheduled EMI, either as a lump sum or through regular extra payments, to reduce your loan faster. Because interest is charged only on the outstanding principal, every rupee you prepay directly cuts the balance on which future interest is calculated. The effect compounds over time, so prepaying early in a long loan can save far more interest than the amount you actually pay in.

When you prepay, you usually choose one of two options: reduce the tenure while keeping the EMI the same, or reduce the EMI while keeping the tenure the same. Reducing the tenure saves the most interest because you close the loan sooner and stop paying interest earlier. Reducing the EMI eases your monthly cash flow instead. This calculator shows the interest saved and the new tenure or EMI under either choice.

Prepayment is most powerful in the early years of a loan, when the principal is large and the interest portion of each EMI is highest. Floating-rate home loans in India generally carry no prepayment penalty, making them ideal for this strategy, while fixed-rate and some personal loans may charge a fee. Always weigh the interest saved against any prepayment charges and the returns you could earn by investing the same money instead.

How to use it

• Choose tenure reduction over EMI reduction to maximise the interest you save.
• Prepay as early as possible, since early prepayments cut the most future interest.
• Floating-rate home loans usually have no prepayment penalty, unlike some fixed and personal loans.
• Compare the interest saved with potential investment returns before locking money into prepayment.