Loan Prepayment Calculator

⚡ In shortPaying a lump sum into your loan does more than reduce the balance — because interest is charged on the outstanding principal every month, a prepayment made early removes years of future interest.

Open the free Loan Prepayment Calculator →

How it is calculated

In a reducing-balance loan, each EMI is split between interest (on the balance) and principal. Early on, most of the EMI is interest, so the balance falls slowly. A part-prepayment goes entirely against principal, which immediately shrinks the base on which all future interest is charged. Keeping the EMI the same and letting the tenure shorten saves far more than reducing the EMI, because you keep paying the same amount against a smaller balance. This calculator amortises your loan month by month, applies your lump sum in the month you choose, and compares the result with the original schedule to show the new tenure and the interest saved. The earlier the prepayment, the larger the saving — the same amount paid in year 1 saves several times what it would in year 10.

Reduce the tenure, not the instalment

After a prepayment the lender typically offers a lower EMI or a shorter tenure, and frequently applies the lower EMI unless told otherwise. Shortening the tenure saves substantially more interest, because it removes the final years of the schedule while leaving the monthly payment unchanged. If the current instalment is comfortable, ask in writing for the tenure to be reduced — the difference over a long loan is large.

Early prepayments are worth far more than late ones

In the early years most of each instalment is interest and the principal falls slowly. A prepayment then removes principal that would otherwise have accrued interest for the entire remaining term. The same amount paid in the closing years saves comparatively little, because most of the interest has already been paid. If a prepayment is planned at all, doing it sooner is where nearly all the benefit sits.

Charges: what you can and cannot be levied

RBI rules prohibit foreclosure and prepayment charges on floating-rate home loans advanced to individuals for non-business purposes. Fixed-rate loans, and many personal and business loans, can attract charges — so the sanction letter, not general advice, is the authority for your particular loan. Check it before making a large payment, and get any waiver confirmed in writing.

The tax effect, which cuts both ways

Under the old regime, interest on a self-occupied house is deductible up to ₹2 lakh under section 24(b) and principal repayment falls within the ₹1.5 lakh section 80C limit. Prepaying reduces future interest and therefore that deduction, so the real benefit is the after-tax saving rather than the gross interest avoided. Under the new regime the self-occupied interest deduction is unavailable, which makes prepayment plainly more attractive.

Three checks before you pay

First, keep an emergency fund intact — money used to prepay cannot be taken back out. Second, clear the most expensive debt first: credit cards and personal loans carry far higher rates than a home loan, so paying those down beats prepaying cheap secured debt. Third, on final closure collect the no-dues certificate, the updated interest certificate and the original property documents, and check a few weeks later that the credit bureau shows the account closed. The EMI calculator shows the revised schedule.

Frequently asked questions

Should I reduce the EMI or the tenure when prepaying?

Reducing the tenure saves considerably more interest, because you continue paying the same EMI against a smaller balance. Reducing the EMI only eases monthly cash flow.

Are there prepayment charges on a home loan?

For floating-rate home loans to individuals, the RBI does not permit foreclosure or prepayment penalties. Fixed-rate loans and many personal or business loans can still carry a charge — check your sanction letter.

Does prepaying affect my section 24(b) or 80C benefit?

Prepaying reduces future interest, so the interest you can claim under §24(b) falls in later years. Principal repaid still counts under 80C (old regime), subject to the overall ₹1.5 lakh limit.

Is it better to prepay the loan or invest the money?

Compare your loan rate with the return you can reliably earn after tax. Prepaying a loan is a guaranteed, risk-free return equal to the interest rate; an investment has to beat that on a post-tax basis to be worth it.