Loan Prepayment Calculator
See exactly how much interest you save and how many EMIs you cut with a lump-sum or recurring prepayment — with charts and year-by-year breakdown.
Loan Details
Prepayment Plan
RBI (Pre-payment Charges on Loans) Directions, 2025 prohibit prepayment charges on all floating-rate loans to individual borrowers.
| Without Prepayment | With Prepayment | |
|---|---|---|
Monthly EMI EMI stays the same | ₹44,186 | ₹44,186 |
Loan closes in Closes earlier with prepayment | 20 yr | 15 yr 11 mo |
Total interest paid Interest charged over the full loan life | ₹56.05 L | ₹39.19 L |
Total amount paid Principal + all interest + prepayment amounts | ₹1.06 Cr | ₹89.19 L |
Visual Breakdown
See how your loan balance falls and where the interest savings accumulate year by year.
Outstanding Balance Over Time
How quickly the loan closes with vs without prepayment
Yearly Interest Paid
Interest outflow each year — the gap is your savings
Loan Prepayment in India — The Complete Guide
A loan prepayment is any payment you make over and above your regular EMI that goes directly to reduce your outstanding principal. Because Indian home loans, car loans, and personal loans all use the reducing balance method, every rupee you cut from the principal immediately reduces the base on which future interest is calculated. The compounding works in reverse — and the savings are far larger than most borrowers expect.
Why Early Prepayment Saves Disproportionately More
On a 20-year home loan at 8.75%, your very first EMI is roughly 87% interest and 13% principal. That means ₹87 out of every ₹100 you pay in month 1 is a cost to the bank — not equity in your home. The reason early prepayment is so powerful is that it eliminates future EMIs while they are still in this high-interest phase. A ₹5 lakh prepayment in year 2 doesn't just avoid ₹5 lakh of future principal repayment — it eliminates the interest on that ₹5 lakh for all remaining years, which can amount to ₹8–10 lakh on a long-tenure loan.
The same ₹5 lakh prepayment made in year 16 of the same loan saves only ₹60,000–80,000 in interest — because by then, most of the interest has already been paid and each EMI is mostly principal. Timing is everything. Use the calculator above to see exactly how much any prepayment saves at any point in your loan.
One-Time Lump Sum vs Recurring Monthly Extra
Reduce Tenure vs Reduce EMI — Which Is Better?
After a prepayment, most lenders offer two options:
| Factor | Reduce Tenure | Reduce EMI |
|---|---|---|
| Interest saved | More — exits debt sooner | Less — stays in loan longer |
| Monthly cash flow | Unchanged | Improves immediately |
| Best for | Borrowers who can sustain the EMI | Borrowers with stretched budgets |
| Risk if income drops | Higher (fixed large EMI) | Lower (smaller EMI) |
The financially optimal choice is almost always to reduce tenure — but EMI reduction makes sense if your FOIR (Fixed Obligation to Income Ratio) is already high and the lower EMI meaningfully relieves budget pressure.
RBI Prepayment Charges Rules (2025)
The RBI (Pre-payment Charges on Loans) Directions, 2025, effective January 1, 2026, prohibit all regulated lenders — scheduled commercial banks, small finance banks, NBFCs, and co-operative banks — from levying prepayment or foreclosure charges on floating-rate loans to individual borrowers. This applies regardless of the source of funds (whether borrowed elsewhere or own savings).
Fixed-rate loans may still carry a foreclosure charge of 2–5% of the outstanding principal, depending on the lender's product terms. Before prepaying a fixed-rate loan, calculate whether the interest saved exceeds the foreclosure penalty. Use the calculator above — enter the foreclosure fee as an effective rate increase to model the real cost.
Prepayment vs Investing — How to Decide
The classic question: should you prepay the loan or invest the money? The mathematical answer depends on the post-tax return on investment vs the post-tax cost of the loan.
- Home loan at 8.75%, 30% tax slab: Post-tax loan cost ≈ 8.75% (interest is deductible under 24b up to ₹2L, but the marginal rupee saved by prepayment often exceeds the deduction cap). Compare to equity SIP at a realistic 11–12% CAGR: invest wins — marginally, with higher risk.
- Personal loan at 14%: No tax deduction. Post-tax cost = 14%. Very few investments consistently beat 14% net of tax and risk. Prepaying a personal loan is almost always correct.
- Hybrid rule of thumb: Keep 6-month emergency fund intact. Invest in ELSS or EPF for 80C deduction first. Prepay any loan above 10% rate immediately. For home loans below 9%, split savings 50-50 between prepayment and equity SIP.
To understand exactly how your loan balance falls each year with or without prepayment, check our amortization schedule calculator. To compare two different loan offers on total cost, use the loan comparison tool.