Loan Prepayment Calculator
A loan prepayment calculator is a free online tool that shows exactly how much interest and time you save by making extra payments on your loan — one of the smartest financial moves you can make.
Comparison
Estimates only. Actual savings depend on your bank's prepayment policy and timing.
How to use Loan Prepayment Calculator
- Enter loan details — Add your current loan balance, EMI, and interest rate.
- Choose prepayment amount — Enter how much extra you'll pay and how often.
- See savings — View interest saved and months reduced.
- Compare scenarios — Try different prepayment amounts to find the sweet spot.
Key features
- Interest saved calculation
- Months reduced display
- One-time or monthly prepayment
- Year-wise savings breakdown
- Multiple prepayment scenarios
- Amortization comparison
What is Loan Prepayment?
Loan prepayment means paying more than your scheduled EMI to reduce your outstanding principal. Banks apply the extra amount to principal, which immediately reduces the interest charged on that amount going forward. This creates a compounding effect that can save you years of payments and lakhs in interest on a home or car loan.
How Much Can You Save?
Example: A ₹50 lakh home loan at 9% for 20 years has an EMI of ₹44,986. Paying an extra ₹5,000 per month reduces the loan term to about 15 years and saves ₹18 lakh in interest. Even one extra EMI per year (₹45,000) reduces tenure by 2-3 years and saves ₹5-7 lakh. Small, consistent prepayments create huge long-term savings.
Reduce EMI or Reduce Tenure?
When you prepay, banks offer two options: (1) reduce EMI, keep tenure same, or (2) keep EMI same, reduce tenure. Always choose to reduce tenure. Reducing EMI gives you more monthly cash flow, but reducing tenure eliminates years of interest payments. The lifetime savings are 3-5x higher with the tenure-reduction option.
When to Prepay (And When Not To)
Prepay when: (1) your loan rate is higher than investment returns, (2) you have surplus cash after emergency fund, (3) you're in the early years of the loan (most interest-heavy period). Don't prepay when: (1) investment returns exceed loan rate, (2) you'd drain your emergency fund, (3) prepayment penalties exceed savings, (4) you have high-interest debt (credit cards) to pay first.
Pro tips
- Prepay in the first 5 years for maximum savings
- One extra EMI per year saves 2-3 years of tenure
- Always choose 'reduce tenure' over 'reduce EMI'
- Use bonuses and appraisals for prepayment
Common use cases
- Evaluating home loan prepayment benefit
- Deciding where to invest surplus cash
- Planning annual prepayment from bonuses
- Comparing prepay vs invest decisions
- Calculating interest savings from windfall
Frequently asked questions
Does prepaying a loan save money?+
Yes — significantly. Prepayment reduces your principal, which reduces compounding interest for the remaining loan term.
Should I prepay or invest?+
If your loan rate is higher than expected investment returns (typically 8-9%), prepay. If rates are lower, invest instead.
Are there prepayment penalties?+
Most Indian banks don't charge prepayment penalties on floating-rate home loans. Fixed-rate loans may have 2-4% penalties.
Should I reduce EMI or tenure?+
Reduce tenure — it saves far more interest. Reducing EMI gives immediate cash flow relief but saves less.
How much prepayment is ideal?+
Even one extra EMI per year saves lakhs. The earlier you prepay, the more you save.
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