Loan Prepayment Calculator
The extra payment
| Without prepaying | After prepaying |
|---|
What the same money saves at different times
| If you prepay after | Interest saved | Months saved |
|---|
Same lump sum, paid at different points. This is why "as early as you can" is the whole advice.
Why timing beats amount
In the early years of a long loan, almost every rupee of your EMI is interest and barely any is principal. A prepayment then removes principal that would otherwise have accrued interest for another two decades. The same amount paid in year fifteen removes principal that only had five years left to cost you.
The table at the bottom shows exactly this: one lump sum, applied at different points in the same loan. The difference is usually larger than people expect, and it is the entire reason the advice is always "as early as you can".
Tenure or EMI
Banks will usually offer you the choice. Keeping the EMI and shortening the tenure saves substantially more interest, because the balance disappears sooner. Reducing the EMI leaves the loan running just as long and saves much less — it buys monthly breathing room, which is a fair thing to want, but it should be a deliberate choice rather than the default the bank sets.
Check the charge first
On a floating-rate home loan to an individual, banks in India may not charge a prepayment penalty. Fixed-rate home loans, personal loans and car loans frequently do — often 2 to 5 percent. Put the charge in above and it is deducted from the saving, which occasionally changes the answer entirely on a small prepayment late in the term.
Prepay or invest
Prepaying earns you a guaranteed return equal to your loan rate, with no risk and no tax. An investment has to beat that after tax and reliably to be the better choice. If you are claiming tax relief on home loan interest, your effective rate is lower than the headline, which narrows the gap.
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Frequently Asked Questions
Reducing the tenure saves far more, because interest is charged on the outstanding balance for as long as it is outstanding. Keeping the EMI the same and finishing early is almost always the better arithmetic — reducing the EMI mostly buys comfort, not savings. Both are shown so you can see the gap.
Earliest is best. In the first years almost all of your EMI is interest, so a rupee paid then removes far more future interest than the same rupee paid later. By the final years most of the EMI is principal and prepaying saves comparatively little.
On a floating-rate home loan to an individual, banks in India are not permitted to levy a prepayment penalty. Fixed-rate loans, and personal and car loans, often do charge — commonly 2 to 5 percent of the amount. Ask before you pay, and weigh the charge against the saving shown here.
Compare the loan rate with what you would earn after tax. Prepaying is a guaranteed, risk-free return equal to your interest rate; an investment that might beat it is not guaranteed. On a home loan you may also be claiming tax relief on the interest, which lowers the effective rate you are saving.
No. It assumes the rate stays as entered for the life of the loan. On a floating loan it will not, so treat the saving as an indication rather than a promise.
No. It is all worked out in your browser and nothing is stored.