Loan Prepayment Calculator

Why prepay a loan?

In the early years of a long loan, most of each EMI goes towards interest. Any extra amount you pay goes straight to reducing principal, which cuts all future interest on that amount. On a 20-year home loan, even small regular prepayments can save lakhs and finish the loan years early.

Reduce tenure or reduce EMI?

After a prepayment, lenders usually offer two options:

• Reduce tenure: the EMI stays the same and the loan ends earlier. This saves the most interest.
• Reduce EMI: the tenure stays the same and the EMI falls, improving monthly cash flow but saving less interest.

The calculator shows both side by side. If your budget is comfortable, reducing tenure is typically the better financial choice.

When prepaying makes sense

• Your loan rate is higher than what you can safely earn on the money elsewhere after tax.
• You already have an emergency fund of several months’ expenses.
• In the old tax regime, home loan interest up to ₹2 lakh is deductible, which reduces the effective rate. Factor that in.

Charges

Under RBI guidelines, banks don’t charge prepayment penalties on floating-rate home loans to individuals. Fixed-rate loans and some personal and car loans may have charges; check your loan agreement.

Related

Calculate your original EMI and schedule with the EMI calculator. Estimates assume a constant interest rate; floating rates can change.

Example

On a ₹30 lakh home loan at 8.5% for 20 years, the EMI is about ₹26,000 and total interest around ₹32 lakh. Prepaying ₹1 lakh every year from year two, while keeping the EMI unchanged, can cut several years off the tenure and save many lakhs in interest. Enter your own numbers to see the exact figures; the earlier you start prepaying, the bigger the saving.

Ask your lender for an updated repayment schedule after each prepayment and check that it reflects your chosen option.