How to use the loan prepayment calculator
- Enter the outstanding principal, interest rate and remaining tenure from your latest loan statement.
- Add a one-time prepayment and the year you will make it.
- Add a yearly prepayment, such as a bonus, or a yearly EMI increase.
- Compare the two options side by side: cut the tenure or cut the EMI.
- Use the chart to see how much sooner the loan ends.
Why timing matters: ₹2 lakh prepaid on ₹30 lakh
| Prepaid at | Saved (cut tenure) | Time saved | Saved (cut EMI) |
|---|---|---|---|
| End of year 1 | ₹4,10,225 | 1 yr 8 mo | ₹1,42,693 |
| End of year 3 | ₹3,20,788 | 1 yr 5 mo | ₹1,19,696 |
| End of year 5 | ₹2,43,795 | 1 yr 3 mo | ₹97,566 |
| End of year 10 | ₹95,833 | 10 mo | ₹46,198 |
Loan of ₹30 lakh at 8.5% with 15 years left. The earlier you prepay, the more interest you avoid.
Small regular prepayments add up
| Plan | Interest saved | Loan ends in |
|---|---|---|
| ₹2 lakh once, year 1 | ₹4,10,225 | 13 yrs 4 mo |
| ₹50,000 every year | ₹5,25,089 | 12 yrs |
| ₹1 lakh every year | ₹8,40,285 | 10 yrs |
| EMI up 5% a year | ₹6,13,264 | 10 yrs 6 mo |
All with the EMI kept the same and the tenure cut. Without prepaying, the loan runs 15 yrs and costs ₹23,17,594 in interest.
Before you prepay
- Keep an emergency fund of at least six months' expenses; prepaid money is hard to get back.
- Ask the bank to apply the payment to principal and to keep the EMI unchanged, and get a revised schedule.
- Check whether a lower rate elsewhere would save more; see the balance transfer calculator.
- For the full EMI schedule with rate changes, use the EMI calculator.
Frequently asked questions
Is it better to reduce EMI or tenure after a prepayment?
Reducing the tenure saves more, because you keep paying the same EMI and the loan ends sooner. On ₹30 lakh at 8.5% with 15 years left, a ₹2 lakh prepayment after a year saves ₹4,10,225 if you cut the tenure, against ₹1,42,693 if you cut the EMI. Choose a lower EMI only if you need the monthly cash flow.
Are there charges for prepaying a loan?
Under RBI's Pre-payment Charges on Loans Directions, 2025, lenders cannot charge for part or full prepayment of floating-rate loans to individuals for non-business purposes (for loans sanctioned or renewed from 1 January 2026; floating-rate home loans were already free of these charges). Fixed-rate loans can carry a charge if it is disclosed in the loan agreement and key facts statement.
When is the best time to prepay?
As early as possible. Interest is charged on the outstanding balance, which is highest in the early years, so the same prepayment saves much more in year one than in year ten. See the table of prepayment timing below.
Should I prepay my home loan or invest?
Prepaying earns your loan rate risk-free and tax-free. If you are in the old tax regime and still within the ₹2 lakh home-loan interest deduction, your effective loan rate is lower, so investing may win if you expect higher post-tax returns. Many people do both: keep an emergency fund, invest for long-term goals, and prepay with bonuses.
Does prepaying affect my tax benefit?
In the old regime, home loan interest on a self-occupied house is deductible up to ₹2 lakh a year and principal counts towards the ₹1.5 lakh limit for deductions such as 80C. Prepaying lowers future interest, so if your interest is already below ₹2 lakh you lose some deduction, but the interest saved is always more than the tax lost.
How does this calculator handle prepayments?
Prepayments are made at the end of the loan year you choose, after that month's EMI. When you cut the tenure, the EMI stays the same and the loan ends sooner. When you cut the EMI, the bank recalculates it over the remaining original tenure. Banks may apply part-payments slightly differently, so check your statement.