Loan Prepayment Calculator

Enter the balance you still owe, the rate, the remaining tenure and the amount you plan to pay early. The calculator compares the two options your bank will offer: keep the EMI and shorten the tenure, or keep the tenure and lower the EMI.

How to use the loan prepayment calculator

1. Outstanding loan balance: the principal still owed, from your latest loan statement or net banking. Do not enter the original sanctioned amount.
2. Interest rate: the current rate on the loan. For a floating-rate loan, use the rate after the latest reset.
3. Remaining tenure: the years left on the loan as it stands today.
4. Part-payment amount: the lump sum you plan to pay, such as a bonus, maturity proceeds from an FD or an inheritance.

The result shows the interest saved under each option, how much earlier the loan ends if you keep the EMI, and the new EMI if you reduce it instead. A table puts the three cases side by side: no part-payment, reduce tenure and reduce EMI.

A worked example

Say you owe ₹30 lakh on a home loan at 8.5% with 15 years left. The EMI is ₹29,542, and if nothing changes you will pay about ₹23.18 lakh more in interest.

Now you prepay ₹5 lakh.

	No part-payment	Reduce tenure	Reduce EMI
EMI	₹29,542	₹29,542	₹24,618
Tenure left	15 years	10 years 10 months	15 years
Interest still to pay	₹23.18 lakh	₹13.29 lakh	₹19.31 lakh
Interest saved		₹9.89 lakh	₹3.86 lakh

Keeping the EMI and cutting the tenure saves almost ₹10 lakh and ends the loan 50 months early. Lowering the EMI saves about ₹3.9 lakh and frees up ₹4,924 a month.

A smaller amount works the same way. A ₹1 lakh part-payment on the same loan saves about ₹2.43 lakh of interest and cuts 11 months if you keep the EMI, or saves about ₹77,000 and lowers the EMI to ₹28,557 if you reduce it.

Reduce tenure or reduce EMI?

Reducing the tenure saves more because your EMI stays high and every rupee above the month’s interest goes to principal. Reducing the EMI spreads the smaller balance over the same months, so less principal is repaid each month and interest runs on it longer.

Reducing the EMI still makes sense when:

• your budget is stretched, for example after a rate rise,
• your income is uncertain and you want a lower fixed commitment,
• you plan to keep paying the old EMI amount by standing instruction anyway, which gives you the full saving with a lower minimum to fall back on.

Most banks apply part-payments to reduce the tenure by default. If you want a lower EMI, ask for it in writing when you make the payment.

Prepayment charges in India

RBI rules bar banks and NBFCs from charging foreclosure or part-payment fees on floating-rate term loans taken by individuals for purposes other than business. Since almost all home loans are floating-rate, most home loan borrowers can prepay any amount, any time, for free.

Charges can still apply to:

• fixed-rate loans, often 2% to 4% of the amount prepaid,
• personal loans, which are usually fixed-rate and may have a lock-in of 6 to 12 months,
• car loans, depending on the lender,
• loans taken in a business’s name.

Check your loan agreement or key fact statement before prepaying. If there is a charge, subtract it from the interest saved to see the real benefit.

How banks apply a part-payment

Most banks let you prepay through net banking or at the branch. The money goes to principal on the day it is received, and the next EMI is split on the reduced balance. Some banks set a minimum part-payment, often equal to one or more EMIs, and a few limit how many times a year you can prepay without paperwork.

After paying, ask for a revised repayment schedule and check that the balance has dropped by the full amount. Compare it against a fresh schedule from the loan amortization schedule built on the new balance.

When prepaying makes the most sense

Prepaying early in a loan saves the most, because interest has the most time left to run. In the last few years of a loan, most of each EMI is already principal, so prepayment saves little.

Before prepaying, compare the guaranteed return of the loan rate with your other options:

• Keep an emergency fund of six months of expenses and EMIs first.
• Pay off costlier debt, such as credit cards or personal loans, before the home loan.
• Under the old tax regime, the home loan interest deduction under Section 24(b) lowers the effective rate on up to ₹2 lakh of interest a year. If your yearly interest is well above ₹2 lakh, prepaying reduces interest you get no deduction for.
• Compare with what safe investments pay after tax. An FD at 7% taxed at 30% yields about 4.9%, which is less than an 8.5% loan costs. The FD calculator shows the figures.
• For long-term goals, equity mutual funds may earn more than the loan rate, but with risk. The SIP calculator shows projections at different returns.

A simple test helps: if the money would otherwise sit in a savings account or FD earning less than your loan rate after tax, prepaying is the better use. If it would go into equity for ten years or more, the answer is less clear.

Prepaying or switching lenders?

If your rate is well above what new borrowers get, a lower rate may save more than a part-payment. Your own bank may offer a rate reduction for a fee, or you can move the loan to another lender. The balance transfer calculator compares the saving with the switching costs. Often the best result comes from doing both: get the rate down, then prepay whenever you can.

Regular prepayments

The calculator models one lump sum. Many borrowers prepay a fixed amount every year, such as their annual bonus, or raise the EMI by 5% to 10% each year as their salary grows. Both shorten a 20-year loan by many years. To estimate a yearly prepayment, run the calculator once for each year’s amount with the balance from the loan amortization schedule at that date, or ask your bank whether it offers an EMI step-up.

To give a sense of scale, on the same ₹30 lakh loan at 8.5% with 15 years left, prepaying ₹1 lakh at the end of every year while keeping the EMI ends the loan in exactly 10 years and saves about ₹8.4 lakh of interest. Raising the EMI by 5% every year instead, with no lump sums, ends it in about 10 years and 6 months and saves about ₹6.1 lakh. Both are within reach for many salaried borrowers, and both beat waiting for one large windfall.

Documents and records

Keep the receipt or acknowledgement for every part-payment, and download the revised schedule. When the loan closes, collect the no-dues certificate and the original property documents, and check that the lender has removed its charge from the CERSAI registry and, if applicable, from the land records. Under RBI rules, lenders must return original documents within 30 days of full repayment.

The calculator runs in your browser. Nothing you enter is sent or stored.

Frequently asked questions

Is it better to reduce EMI or tenure after a part-payment?

Reducing tenure saves more interest. On ₹30 lakh at 8.5% with 15 years left, a ₹5 lakh prepayment saves about ₹9.9 lakh if you keep the EMI and about ₹3.9 lakh if you lower it. Choose a lower EMI only if you need the monthly cash flow.

Is there a penalty for prepaying a home loan?

Not on a floating-rate home loan taken by an individual. RBI rules prohibit foreclosure and part-payment charges on these loans. Fixed-rate home loans, loans in a company’s name and some personal and car loans may have charges, so check your loan documents.

How often can I prepay my home loan?

As often as your lender allows. Many banks accept part-payments any time through net banking, with a minimum amount such as one EMI. Some NBFCs limit the number of prepayments a year. Ask your lender, and keep the receipt of each part-payment.

Should I prepay my home loan or invest in mutual funds?

Prepaying earns the loan rate with no risk. Equity funds have historically earned more over long periods but can fall sharply in any year. A common approach is to keep an emergency fund, invest for long-term goals, and use bonuses or windfalls to prepay, especially early in the loan.

Will prepaying affect my tax benefit?

Under the old regime, it reduces the interest you can claim under Section 24(b), but only below the ₹2 lakh limit. If your interest is above ₹2 lakh, the part you lose is interest that was not deductible anyway. Principal prepayment counts toward Section 80C, within its ₹1.5 lakh limit. The new regime gives no deduction for a self-occupied home.

When does prepaying stop being worth it?

Near the end of the loan, when most of each EMI is principal and little interest is left to save. If only two or three years remain, the saving is small, and keeping the money as an emergency fund or investing it may serve you better.