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: ~₹29,40,289
📅 Schedule Multiple Prepayments
Add lump sums at specific months (1-167)
Click "+ Add Event" to schedule multiple prepayments
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.
🔍 Why Your Numbers May Differ From Bank Statement
If the interest or outstanding amount shown here differs slightly from your bank statement, don't worry! This is normal and happens due to differences in calculation methodology.
📅 Day Count Convention
Our calculator: Uses 30/360 (each month = 30 days)
Banks may use: Actual/365 (exact days in each month)
Impact: 0.5-1.5% difference annually
⏱️ First EMI & Disbursement
Our assumption: EMI starts exactly 1 month from loan start
Reality: Banks may add pre-EMI interest for partial month
Impact: Can add ₹5,000-15,000 to total interest
💳 Fees Added to Principal
Our calculation: Uses the principal you entered
Banks may add: Processing fee, insurance premium to loan amount
Impact: Higher EMI if fees are financed
📊 Cumulative Rounding
Per EMI: Banks round to nearest rupee
Over 20 years: 240 small roundings add up
Impact: ₹1,000-5,000 cumulative difference
✅ How to Get Exact Match
- •Use your actual EMI: In the "Running Loan" estimator, select "Know EMI + Tenure" method and enter your bank's EMI amount
- •Check outstanding balance: Get exact outstanding from bank and use as principal for foreclosure calculations
- •Account for part-payments made: Past prepayments affect current outstanding – get latest statement
❓ 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.