Loan prepayment calculator

Loan prepayment means paying more than your scheduled EMI — either a one-time lump sum or a little extra every month or year. The additional amount goes straight towards your outstanding principal, which reduces the interest charged on every future EMI. On a long loan this can save several lakhs of rupees and clear the debt years early.

You usually get to choose, but reducing the tenure saves far more interest. This calculator keeps your EMI the same and shortens the loan, because a fixed EMI against a smaller balance clears the principal faster. Reducing the EMI instead lowers your monthly outgo but barely changes the total interest — so it does not save you time.

Both help; what matters is how early and how much. A large one-time prepayment early in the loan removes principal that would otherwise have compounded interest for years. Recurring prepayments — a fixed extra each month or a yearly bonus — are easier to sustain and add up powerfully over time. Use the toggle to compare your own numbers.

For floating-rate home loans taken by individuals, the RBI does not allow prepayment or foreclosure charges. Fixed-rate loans and some personal or car loans may carry a charge of 2–5% of the prepaid amount, so check your loan agreement. Even with a small charge, the interest saved usually dwarfs it — but factor it in before deciding.

Compare your loan rate with the return you can reliably earn after tax. Prepaying a 9% home loan is a guaranteed 9% saving, which is hard to beat safely. If you expect higher returns from equities over a long horizon and are comfortable with the risk, investing may win. Many people do both — prepay enough to feel secure, and invest the rest.

Early in the loan. In the first years, most of your EMI goes towards interest, so removing principal then avoids the most future interest. The same prepayment made in the final years saves very little, because little interest is left to charge. If you have a windfall, prepaying sooner almost always beats waiting.