Loan Prepayment Calculator
Calculate interest savings with lump sum or monthly extra payments on your home loan, car loan, or personal loan.
🏠 New Loan Details
💰 Prepayment Options
⏱️ Keep EMI same, close loan earlier
💡 Balance at month 12: ~₹29.40L
Before → After
Your Savings
📋 Assumptions
- • Reducing balance method
- • Prepayment after EMI
- • No prepayment charges
Loan Prepayment Guide: How Part-Payment Saves Lakhs
When to prepay, strategies compared, RBI rules, prepay vs invest decision, and common mistakes to avoid.
📖 How Loan Prepayment Works
Loan prepayment means paying extra money towards your loan principal — beyond your regular EMI. This directly reduces your outstanding balance, which means less interest charged in future months.
Lump Sum Payment
One-time large payment (bonus, inheritance, savings)
Monthly Extra
Regular additional amount on top of EMI
Choose Strategy
Reduce tenure (save more) or reduce EMI (cash flow)
💡 Key Insight: On a ₹50 lakh home loan at 8.5% for 20 years, a ₹5 lakh prepayment after 2 years can save you over ₹8 lakhs in interestand reduce your loan tenure by 3+ years!
🎯 Prepayment Strategies: Reduce Tenure vs Reduce EMI
⏱️ Reduce TenureRecommended
Keep paying the same EMI, but close your loan earlier.
Example:
₹50L loan, 20 years, ₹5L prepayment
→ Saves ₹8.5L, closes 3 years early
💵 Reduce EMI
Keep the same tenure, but lower your monthly payment.
Example:
₹50L loan, 20 years, ₹5L prepayment
→ EMI drops by ₹4,200/month
📊 Bottom Line: If you can afford your current EMI comfortably, always choose Reduce Tenure. If you need breathing room in your monthly budget, choose Reduce EMI.
📐 Prepayment Calculation Formulas
1. Interest Saved by Prepayment
Interest Saved = (Original Total Interest) - (New Total Interest)
Where:
- Original Total Interest = Sum of all interest in baseline schedule
- New Total Interest = Sum of all interest with prepayment applied
Example: ₹30L loan at 8.5% for 20 years
Original interest = ₹31.48L
After ₹5L prepayment at month 12 = ₹24.15L
Interest Saved = ₹7.33L
2. Remaining Tenure After Prepayment
n = log(EMI / (EMI - P' × r)) / log(1 + r)
Where:
- n = Remaining months
- EMI = Your current EMI
- P' = New principal (after prepayment)
- r = Monthly interest rate
3. New EMI After Prepayment (Reduce EMI Mode)
New EMI = P' × r × (1+r)^n / ((1+r)^n - 1)
Where:
- P' = New principal (after prepayment)
- r = Monthly interest rate
- n = Remaining months (unchanged)
Example: ₹30L balance, ₹5L prepayment, 15 years left at 8.5%
New principal = ₹25L
New EMI = ₹24,622 (down from ₹29,547)
4. Net Benefit After Prepayment Charges
Net Benefit = Interest Saved - Prepayment Charges
Prepayment Charge = Prepayment Amount × Charge %
Good News: As per RBI guidelines, floating rate home loans in India have zero prepayment charges!
Note: Fixed rate loans and some personal/car loans may have 2-4% charges.
❓ Frequently Asked Questions
When is the best time to make a prepayment?▼
Earlier is always better! Here's why:
- In early years, most of your EMI goes towards interest
- Prepaying early reduces the principal on which future interest is calculated
- The "compounding effect" works in your favor when you prepay early
Example (₹50L loan, 20 years, 8.5%):
| ₹5L Prepayment At | Interest Saved | Tenure Reduced |
|---|---|---|
| Year 1 | ₹8.5L | 38 months |
| Year 5 | ₹6.2L | 28 months |
| Year 10 | ₹3.8L | 18 months |
Tip: Same ₹5L saves ₹4.7L more if paid in Year 1 vs Year 10!
Should I prepay my loan or invest the money?▼
Compare the returns:
- Prepayment Return: Your loan interest rate (e.g., 8.5% for home loan)
- Investment Return: Expected returns after tax
General Guidelines:
Prepay If:
- Loan rate > 10% (personal/car)
- You're in early loan years
- You don't have investment discipline
- You prefer guaranteed returns
Invest If:
- Loan rate < 9% (subsidized home loan)
- You can invest in equity for 10+ years
- You're maxing tax benefits (80C, HRA)
- You have emergency fund covered
Best Strategy: Do both! Prepay high-interest loans, invest in equity for long term
Are there prepayment charges on home loans in India?▼
As per RBI guidelines (2014):
✅ No prepayment charges on floating rate home loans for individual borrowers
When charges may apply:
- Fixed rate loans: 2-4% of prepaid amount
- Car loans: 2-5% (varies by lender)
- Personal loans: 2-5% + GST
- Balance transfer: Usually no charges in first 3-5 years lock-in
Tip: Always check your loan agreement before prepaying
What is the difference between part payment and foreclosure?▼
Part Payment
- Pay extra but keep loan running
- Reduces principal, not full closure
- Can be done multiple times
- Usually min ₹10,000 - ₹1 lakh
Foreclosure
- Pay entire outstanding to close loan
- Get NOC (No Objection Certificate)
- Property documents released
- One-time complete closure
Pro Tip: Some banks have minimum part payment amounts or limit prepayments to 2-4 times per year. Check your loan terms.
How do I find my current outstanding loan amount?▼
Multiple ways to check:
- Net Banking / Mobile App: Most banks show real-time balance
- Loan Statement: Request from bank (usually free once a year)
- Customer Care: Call your bank's helpline
- Bank Visit: Get statement from your branch
Don't know outstanding? Use our "Estimate Outstanding" feature above! Enter your original loan details and EMIs paid, we'll calculate it for you.
Do I lose tax benefits if I prepay my home loan?▼
Yes and No:
- Section 24: Interest deduction (up to ₹2L) — will reduce as interest reduces
- Section 80C: Principal deduction (up to ₹1.5L) — will reduce as principal reduces
But consider this:
Even with tax benefits, paying 8.5% interest to save 30% tax means you're still paying net ~6% interest. Prepaying eliminates this cost entirely!
Strategy: If you're already maxing 80C with EPF/PPF/ELSS, prepayment makes more sense
💡 Smart Prepayment Tips
Target High-Interest Loans First
Prepay personal loans (12-18%) and car loans (9-12%) before home loans (8-9%)
Use Annual Bonus Wisely
Allocate 50% of bonus to prepayment. Consistent small prepayments beat rare large ones
Keep Emergency Fund First
Maintain 6 months expenses before aggressive prepayment. Don't liquidate all savings
Track Your Progress
Save your calculations to see how each prepayment impacts your loan journey
Prepay Early in Loan Life
First 5 years have maximum impact. Same amount saves more interest when paid earlier
Get Written Confirmation
After prepayment, get updated loan statement showing reduced principal and new schedule
Disclaimer: This calculator provides estimates for educational purposes. Actual savings may vary based on your bank's calculation method, prepayment charges, and processing fees. Always verify with your lender before making prepayments.