How to use the loan prepayment calculator
- Enter your loan amount, interest rate and tenure as they were when the loan started.
- Add a one-time prepayment and the year after which you'll pay it – for example ₹2 lakh after year 2.
- Add a yearly prepayment (paid at the end of every year, like a bonus) and/or a small extra amount every month on top of your EMI.
- Choose whether the bank should reduce your tenure (same EMI, loan ends sooner) or reduce your EMI (same end date, smaller EMI).
The result shows the interest you save, your new loan length or new EMI, and a year-by-year comparison of the outstanding balance.
Why prepaying saves so much
Every month, interest is charged on the balance you still owe. A prepayment goes straight to reducing that balance, so it cuts the interest for every remaining month of the loan. That's why money prepaid early in a long loan saves far more than the same amount prepaid near the end.
Example: on a ₹30 lakh home loan at 8.5% for 20 years (EMI ₹26,035):
- A single ₹2 lakh prepayment after 2 years ends the loan about 31 months sooner and saves roughly ₹6.2 lakh of interest.
- Prepaying ₹1 lakh every year ends the loan in about 11.8 years instead of 20 and saves roughly ₹14.8 lakh.
To see why your early EMIs are mostly interest, read our guide on how EMI is calculated.
Reduce tenure or reduce EMI?
Reducing the tenure keeps your EMI the same and finishes the loan sooner. It saves the most interest. Reducing the EMI keeps the end date and lowers your monthly payment – useful if your budget is tight or you want more monthly cash flow, but it saves less interest. Try both options above to see the difference for your own loan.
Before you prepay
- Charges: for floating-rate home loans taken by individuals, banks in India generally cannot charge a prepayment penalty. Fixed-rate loans and many personal or car loans may have charges – check your loan agreement.
- Emergency fund first: keep 3–6 months of expenses aside before putting spare money into a loan.
- Costly debt first: clear credit cards and personal loans before prepaying a cheaper home loan.
- Tax benefits: home loan interest and principal can qualify for income tax deductions depending on the tax regime you choose. Consider this, or ask a tax adviser.
- Get it in writing: ask the bank for an updated repayment schedule after each prepayment.
Results are estimates. Your bank's figures may differ slightly depending on exact dates and how it applies prepayments.
Frequently asked questions
Is it better to prepay a home loan or invest?
It depends on your loan rate, expected investment returns, taxes and your comfort with risk. Prepaying gives a guaranteed saving equal to your loan interest rate, while investments may earn more or less. Many people do a bit of both.
Should I reduce my EMI or my tenure after prepayment?
Reducing the tenure saves more interest overall. Reducing the EMI lowers your monthly payment. Choose based on whether you want to save the most or need more monthly cash.
Is there a penalty for prepaying a home loan?
For floating-rate home loans taken by individuals, banks generally cannot charge prepayment penalties in India. Fixed-rate and some other loans may have charges, so check your agreement.
When is the best time to prepay?
As early as possible, because the interest saved is largest when the outstanding balance is high.