Loan Prepayment Calculator

Stuck in a long-term loan trap? Finding extra cash to pay off your debt faster? Our Loan Prepayment Calculator shows you exactly how much interest you can save by making part-payments on your home or personal loans.

What Is Loan Prepayment?

Prepayment refers to paying more than your scheduled EMI. This extra amount goes 100% towards reducing your principal balance, which in turn reduces the interest charged in all subsequent months.

Partial vs full prepayment

• Part-payment: Paying a lump sum amount (e.g., ₹50,000) once or periodically.
• Full Prepayment (Foreclosure): Paying off the entire outstanding loan balance to close the loan account permanently.

Prepayment charges explained

Under RBI guidelines, banks cannot charge penalties for prepaying floating-rate home loans. However, verify charges for car or personal loans.

When prepayment makes sense

It makes the most sense in the early years of a loan when the interest component is highest. Even small prepayments can shave off months from your tenure.

How Loan Prepayment Calculator Works

This tool simulates your loan amortization schedule.

Inputs used for calculation

• Loan Details: Amount, Rate, and Original Tenure.
• Prepayment Details: Amount and the month when you plan to pay it.

Prepayment calculation logic explained

When you input a prepayment, the calculator instantly readjusts the remaining principal. It then recalculates the schedule to show you the new termination date (if reducing tenure) or the new monthly installment (if reducing EMI).

Loan Prepayment Impact on EMI

Some borrowers prefer to lower their monthly burden.

Reducing EMI strategy

If you choose this, your loan tenure remains the same, but your monthly EMI drops.

Pros and cons

Pros: Increases monthly disposable income.
Cons: Interest savings are lower compared to the tenure-reduction strategy.

Loan Prepayment Impact on Tenure

This is the wealth-building strategy.

Reducing loan tenure strategy

Here, you keep paying the same EMI, but the loan finishes years earlier.

Pros and cons

Pros: Massive interest savings; debt-free sooner.
Cons: Monthly cash flow remains tight (same high EMI).

How Much Interest Can You Save With Prepayment?

Let's look at an example. On a ₹50 Lakh home loan at 8.5% for 20 years:

• Total Interest without prepayment: Approx ₹54 Lakhs.
• Scenario: Pay ₹1 Lakh extra every year.
• Result: Loan finishes in ~12 years instead of 20. Interest saved: ~₹22 Lakhs!

Loan Prepayment for Different Loans

Home loan prepayment

Most effective due to long tenures. Always prioritize prepaying home loans early in the tenure. Use our Loan EMI Calculator to check your base schedule.

Personal loan prepayment

Personal loans have high interest (11-20%). Prepaying them gives a guaranteed "return" equal to that interest rate, which is higher than most fixed deposits.

Car loan prepayment

Depreciating assets like cars should be paid off fast. However, check for lock-in periods and penalties.

Common Mistakes People Make While Prepaying Loans

• Prepaying late in the tenure (when most interest is already paid).
• Using emergency funds to prepay loans.
• Ignoring the effective cost of the loan versus investment returns (e.g. paying off a cheap home loan instead of investing in high-growth equity).

Why Use an Online Loan Prepayment Calculator?

Calculating amortization changes manually is nearly impossible. Our calculator visualizes the "What-If" scenarios instantly, empowering you to make the best decision for your financial freedom.

Related Financial Tools