Loan Prepayment Calculator
See how much interest you save and how many months you cut from your tenure when you prepay a home, car, personal or education loan.
Prepaying a loan is one of the simplest financial moves a borrower can make to save money. The mechanics are straightforward. You pay more than the EMI, the extra money reduces the principal, and the interest savings flow from the new lower balance for the rest of the tenure. The loan prepayment calculator on this page tells you exactly how much interest you save and how many months you shorten the tenure for any combination of extra monthly payments and one time lump sum prepayments.
Loan
Prepayments
Why use the Loan Prepayment Calculator
Most borrowers underestimate the impact of small prepayments. A 5,000 rupee a month extra on a 50 lakh home loan can shorten the tenure by 5 years and save more than 15 lakh rupees in interest over the life of the loan. The calculator quantifies this exactly so you can decide whether to prepay, invest the surplus, or split between the two. The answer depends on the loan rate, the alternative investment return and your personal preference for guaranteed savings versus market linked returns.
Benefits at a glance
See the rupee value of every prepayment
Enter an extra monthly payment and a one time lump sum, and the calculator shows the exact interest saved over the life of the loan. The number is usually a multiple of the prepayment amount itself, which is the core argument for prepaying.
Tenure shortening, not just EMI reduction
Most banks let you choose between keeping the EMI same and shortening tenure, or keeping the tenure same and lowering the EMI. The calculator models the tenure shortening case, which usually saves more interest.
Compare extra monthly versus one time lump sum
Test what 5,000 a month does versus 5 lakh as a one time payment in year 3. Both have different cash flow implications and different total savings. The calculator runs both scenarios so you can pick the one that fits.
Useful for every reducing balance loan
Home loans, car loans, education loans, personal loans. Anywhere there is a principal balance and a monthly EMI, prepayment math applies. The calculator works for all of them.
How to use the Loan Prepayment Calculator
- 1
Enter your current loan details
Original loan amount, interest rate and remaining tenure. If your loan is mid way through, use the current outstanding balance and the remaining months in place of the original numbers.
- 2
Set the extra monthly payment
The amount you can afford to pay above the regular EMI each month. Even 2,000 to 5,000 rupees a month extra adds up to large savings on a long tenure loan.
- 3
Set a one time prepayment if applicable
If you have a lump sum coming in (annual bonus, FD maturity, ESOP exercise), enter the amount and the month it lands. The calculator applies the prepayment at that month and recomputes everything.
- 4
Read the interest saved and months shortened
Compare the new total interest with the baseline. The difference is your saving. The months shortened tells you when the loan ends under the prepayment plan versus the original schedule.
Frequently asked questions
Should I prepay my home loan or invest the surplus?
Compare the post tax cost of the loan against the post tax return on the alternative investment. A floating rate home loan at 8.5 percent has an effective post tax cost of roughly 7 to 7.5 percent for most borrowers (after the Section 24B deduction). Equity mutual funds historically deliver 11 to 13 percent post tax over long periods. Investing usually wins on expected return, but prepayment offers a guaranteed saving and emotional peace of mind. Many borrowers split the surplus between both.
Are there penalties for prepaying a loan in India?
RBI prohibits prepayment penalties on floating rate retail loans, including most home loans. Fixed rate home loans, car loans and personal loans may carry penalties of 2 to 5 percent of the prepaid amount, depending on the lender. Education loans typically allow free prepayment. Always check your loan agreement before paying a large lump sum.
Should I shorten the tenure or lower the EMI after prepayment?
Shortening the tenure usually saves more total interest because the loan ends earlier and stops generating interest sooner. Lowering the EMI gives more monthly cash flow flexibility but extends the interest accrual period. For most borrowers focused on minimising lifetime cost, tenure shortening is the better choice.
Is it better to prepay early in the loan or later?
Earlier prepayment saves more interest because the outstanding principal is larger in the early years. The same prepayment in year 2 of a 25 year loan saves significantly more interest than the same amount in year 20, when the balance is much smaller and most of the interest has already been paid.
Can I do partial prepayment monthly along with the EMI?
Yes. Most banks allow part prepayments in any month, often with a minimum amount (typically equal to one EMI). The system applies the part payment to principal, recomputes the outstanding balance and either shortens the tenure or lowers the EMI based on your standing instruction. The calculator models this through the extra monthly payment field.
What is the loan to investment break even rate?
The break even rate is the post tax loan rate. If the loan costs you 7.5 percent post tax, you need to earn more than 7.5 percent post tax on the alternative investment for investing to win on expected return. Equity easily clears this bar over long periods. Bank FDs typically do not. Hybrid funds are borderline and depend on the period.
Will my CIBIL score improve after I prepay a loan?
Closing a loan in full reduces your debt to income ratio and improves your credit utilisation, both of which positively affect CIBIL. However, closing a loan also removes a credit account from your history, which can slightly reduce your overall credit length and momentarily dip your score. The net effect is usually positive within 2 to 3 months.
Final word
Prepayment is the most predictable way to save money on a loan. There is no market risk, no tax to navigate, and the saving is locked in the day you make the payment. Use the calculator before any lump sum decision (an annual bonus, an FD maturity, a tax refund) so you have the rupee value of the saving in front of you. If the alternative investment realistically beats your loan rate after tax, by all means invest. If not, prepay and move on.
Browse every RunwayCalc calculator