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Loan Prepayment Calculator

Calculate how much interest you save by prepaying your loan. See the impact of extra payments on tenure reduction and total interest paid.

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Loan Prepayment Calculator

Loan Details

₹50,00,000
₹1.0L₹1.0Cr
9%
5%20%
20 yrs
5 yrs30 yrs
Prepayment Details
₹10,000
₹0₹1.0L
3 yrs
0 yrs19 yrs
Current EMI
₹44,986
per month

Prepayment Impact

After 3 years of payments

Remaining Balance
₹46.92 L
Interest Saved
₹30.59 L
Tenure Reduced
5yr 8mo
Without Prepayment
₹45.30 L interest
205 months remaining
With ₹10,000/mo Extra
₹14.71 L interest
137 months remaining

Balance Comparison

Outstanding balance over time

🔑 How Prepayment Helps
Paying extra each month reduces your principal faster, which means less interest accrues over time. Even a small extra payment of ₹5,000-₹10,000/month can save you lakhs in interest over the loan tenure. Red loan = without prepayment. Green line = with extra payment.

How Loan Prepayment Is Calculated

In plain words

When you prepay a loan, every extra rupee reduces the outstanding principal directly. Since interest is calculated on the outstanding balance, a lower principal means less interest in future months. The impact compounds over time — prepaying early in the loan tenure saves significantly more interest than prepaying later, because the outstanding balance is higher in early years.

How the calculation works
EMI = [P × R × (1+R)^N] / [(1+R)^N – 1] Remaining Balance EMI schedule: Interest Portion = Outstanding × R Principal Portion = EMI – Interest Portion With Prepayment: Principal Portion = (EMI – Interest) + Extra Payment Interest Saved = Total Interest Without Prepayment – Total Interest With Prepayment Tenure Reduced = Original Remaining Months – New Remaining Months

A quick example

Let us see the impact of prepaying a ₹50 lakh home loan at 9% for 20 years:

Loan Amount:₹50,00,000
Interest Rate:9% p.a.
Tenure:20 years
Extra Monthly Payment:₹10,000

Step by step

  1. 1.EMI = ₹44,986 per month
  2. 2.After 3 years, remaining balance ≈ ₹46,62,000
  3. 3.Without prepayment: 17 more years, ₹48.4L total interest
  4. 4.With ₹10,000/mo extra: tenure reduces to ~10 years
  5. 5.Interest saved: ~₹18 lakh

So the answer is: EMI: ₹44,986 | Extra ₹10K/mo → Save ₹18L interest | Tenure reduced by ~7 years

Frequently Asked Questions

Should I prepay my home loan?
Prepaying a home loan makes financial sense if: (1) You have surplus cash with no higher-return investment opportunity, (2) Your loan is at a high interest rate (9%+), (3) You are in the early years of the loan when interest component is highest. Consider that home loans offer tax benefits under Section 24(b) and 80C — factor those in before deciding.
Is prepaying a loan better than investing?
If your loan interest rate is higher than what you can reliably earn on investments (post-tax), prepaying is usually better. For example, a 9% home loan costs you 9% effectively (and even more in early years). To beat that, you need a post-tax return of ~10.5%+. If you are a conservative investor, prepaying gives you a guaranteed 9% return with zero risk.
When is the best time to prepay a loan?
The earlier, the better. In the first few years of a loan, the majority of your EMI goes toward interest. Prepaying early reduces the principal significantly, cutting down future interest. After 5-7 years of a 20-year loan, most of the interest has already been paid, so prepaying later has less impact.
Is there a penalty for prepaying a loan?
RBI rules: No prepayment penalty is allowed on floating-rate home loans. For fixed-rate home loans, some banks may charge 2-4% prepayment penalty. For personal and car loans, prepayment penalties vary — typically 0-5% of the outstanding amount. Always check your loan agreement before prepaying.
How much should I prepay each month?
A good rule of thumb: prepay 10-20% of your EMI amount extra each month. Even ₹5,000-₹10,000 per month extra on a ₹50 lakh loan can save ₹10-20 lakh in interest and reduce tenure by 5-7 years. The key is consistency — regular extra payments have a much bigger impact than occasional lump sum payments.