Prepayment Calculator

How loan prepayment works and how the calculator helps

A prepayment (or part-payment) is any amount you pay over and above your
regular EMI to reduce your outstanding loan principal. Because loan interest is
charged on the outstanding balance, cutting that balance early removes a large
chunk of future interest — often far more than the prepayment amount itself. This
loan prepayment calculator shows you exactly how much interest you save and how
many months come off your loan.

Why prepayment saves so much interest

In the early years of a loan, most of your EMI goes towards interest, not
principal. A prepayment in those years attacks the principal directly, so every
future month's interest is calculated on a smaller balance. The result compounds:
a single prepayment keeps saving you interest for the entire remaining tenure.

How prepayment interest savings are calculated

There is no one-line formula — the saving comes from re-running the amortisation
schedule. The calculator:

1. Computes your original schedule (EMI, total interest, total cost).
2. Subtracts your prepayment from the outstanding principal on the date you make it.
3. Recomputes the remaining schedule from that lower balance.
4. Shows the difference: interest saved and months (or EMI) reduced.

Underlying each EMI is the standard formula
EMI = P × r × (1+r)^n ÷ [(1+r)^n − 1], but the prepayment benefit is the gap
between two full schedules — which is why a calculator does it best.

Reduce tenure or reduce EMI — the key choice

When you prepay, most lenders let you choose one of two outcomes:

• Keep the EMI the same, shorten the tenure. This saves the most interest —
  you finish the loan sooner. Best if your EMI is comfortable.
• Keep the tenure the same, lower the EMI. This eases monthly cash flow but
  saves less interest. Best if you need breathing room in your budget.

For maximum savings, always choose reduce tenure unless you specifically need a
smaller monthly payment.

One-time prepayment vs regular prepayment

• A one-time (lumpsum) prepayment — say a bonus or maturity amount — gives an
  immediate, large drop in the balance.
• A recurring prepayment — e.g. an extra ₹5,000 every month — steadily eats the
  principal and can cut years off a long loan. The calculator can model either.

Things to check before prepaying in India

1. Prepayment / foreclosure charges. For floating-rate home loans taken by
   individuals, RBI generally bars prepayment penalties. Fixed-rate loans and many
   business loans do carry charges (often 2–4%) — net these off your saving.
2. Prepay early, not late. The earlier in the tenure you prepay, the more
   interest you save, because more interest is still to come.
3. Compare with investing. If your loan rate is lower than what you could
   reliably earn elsewhere after tax, investing may beat prepaying. For most
   high-rate loans, prepayment's guaranteed saving wins.

When to use this prepayment calculator

Use it before making any part-payment to see the exact interest saved and tenure
cut, to compare reduce-EMI vs reduce-tenure, or to decide whether a one-time or
recurring prepayment fits your goal.