How to use the Loan Prepayment Calculator
- Enter the outstanding loan amount, interest rate and remaining tenure.
- Enter the amount you plan to prepay now.
- Compare the interest saved by reducing the tenure versus the EMI.
About this tool
A part-prepayment reduces your outstanding principal straight away, so less interest is charged every month after it. You can then either keep the same EMI and reduce the tenure or keep the tenure and reduce the EMI. This calculator works out the current EMI with EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), then repays the reduced balance month by month for the first option and recalculates the EMI over the same months for the second.
Reducing the tenure almost always saves more interest, because you keep paying the higher EMI. Reducing the EMI is useful if you want lower monthly outgo. In India, banks and housing finance companies cannot charge prepayment penalties on floating-rate loans taken by individuals for non-business use; fixed-rate loans may carry a charge.
Frequently asked questions
Is it better to reduce EMI or tenure after prepayment?
Reducing the tenure saves more interest. Reduce the EMI only if you need a lower monthly payment.
Is there a penalty for prepaying a home loan?
Not on floating-rate home loans for individuals. Fixed-rate loans and business loans may have prepayment charges — check your agreement.
When is the best time to prepay?
As early as possible. In the early years most of each EMI is interest, so prepaying then cuts the most interest.