Prepayment Calculator
Calculate how much interest you can save and how much faster you can repay your loan by making a prepayment.
- Works for home, personal, car and education loans
- Reduce tenure or reduce EMI
- One-time or recurring prepayment
Loan prepayment calculator
Your prepayment impact
Estimated interest saved ₹5,98,719
| Metric | Without prepayment | With prepayment |
|---|---|---|
| Outstanding principal | ₹50,00,000 | ₹45,00,000 |
| EMI | ₹61,993 | ₹61,993 |
| Remaining tenure | 10 years | 8 years 7 months |
| Total interest | ₹24,39,141 | ₹18,40,423 |
| Total amount payable | ₹74,39,141 | ₹68,40,423 |
By prepaying ₹5,00,000 once and keeping your EMI unchanged, the interest left on your loan could fall from about ₹24,39,141 to ₹18,40,423 — a saving of roughly ₹5,98,719 — and the loan could close about 17 months earlier.
Why use a loan prepayment calculator?
A prepayment calculator turns a lump sum into two numbers you can act on: the interest you would avoid, and the months you would knock off the loan. Without it, most borrowers can only guess whether a ₹5 lakh prepayment is worth making.
1. See the actual interest saving
Interest on a reducing-balance loan is charged on the principal still outstanding. A prepayment cuts that principal immediately, so every month that follows is charged interest on a smaller balance. The saving compounds quietly over the rest of the tenure, which is why it is hard to estimate mentally.
2. Compare prepaying against simply continuing
You may know a bonus is coming without knowing whether putting it into the loan changes anything material. Running both scenarios side by side shows whether the answer is a few thousand rupees or a few lakh.
3. Understand how much tenure you gain
Keeping the EMI unchanged after a prepayment means a larger share of every instalment goes to principal, so the loan can finish earlier. The calculator shows exactly how many months earlier for your figures.
4. Weigh a lower EMI against a shorter tenure
Both options follow the same prepayment, but they do different things for you. One improves monthly cash flow, the other cuts total interest. Switching between the two options above shows the trade-off in rupees.
5. Decide with numbers rather than instinct
This tool does not tell you whether you should prepay. It shows the arithmetic so that the decision, which also depends on your savings, other debts and goals, is made with the numbers in front of you.
6. Plan a large payment before you commit
Useful when you are deciding what to do with an annual bonus, an arrears payout, maturity proceeds from a deposit, or accumulated surplus. Model the amount first, and keep enough aside for emergencies rather than putting every rupee into the loan.
If you are not sure what your current EMI or remaining tenure is, work it out with the Arthzo EMI Calculator before you use this page.
How does loan prepayment work?
Loan prepayment is paying part or all of your outstanding loan principal before the scheduled date. On a reducing-balance loan, interest each month is calculated on the balance outstanding, so a lower balance means lower interest from the very next instalment onwards.
Your EMI is split every month between interest and principal. Early in a loan, most of the EMI goes to interest. A prepayment goes entirely to principal, skipping that split, which is why a single lump sum can remove a disproportionate amount of future interest.
Once the principal drops, your lender applies the change in one of two ways.
Reduce tenure
Your EMI stays broadly the same, so each instalment now covers more principal than before and the loan closes earlier. Total interest falls the most under this option.
Reduce EMI
The remaining tenure stays broadly the same and the EMI is recalculated on the lower principal. Your monthly outgo falls, and total interest falls too, though usually by less than under the tenure option.
Reduce EMI or reduce tenure: which is which?
| Reduce tenure | Reduce EMI | |
|---|---|---|
| Monthly outgo | Unchanged | Falls |
| Loan closes | Earlier | On the original schedule |
| Total interest | Falls more | Falls less |
| Suits you if | Your income comfortably covers the current EMI and you want to be debt-free sooner | Your monthly budget is stretched, or you want to redirect the freed-up amount elsewhere |
| Watch out for | Nothing changes month to month, so the benefit is invisible until the loan ends | Some lenders charge a fee to reset the EMI, and the loan runs its full term |
Neither option is universally correct. The tenure option minimises interest; the EMI option protects cash flow. Many borrowers choose lower EMI during a tight year and switch to the tenure option later.
A worked example
Take a borrower with a home loan that still has ₹50 lakh outstanding at 8.5% a year, with 10 years left to run. The EMI works out to about ₹61,993 and, if nothing changes, roughly ₹24.39 lakh of interest is still to be paid.
Now the borrower prepays ₹5 lakh and keeps the EMI unchanged.
- Principal after prepayment
- ₹45,00,000
- Interest still payable
- ₹18,40,423
- Interest avoided
- ₹5,98,719
- Loan closes earlier by
- 17 months
The ₹5 lakh removes 10% of the principal but far more than 10% of the remaining interest, because it also removes every future month of interest that principal would have generated. That is the whole mechanism in one line.
These figures follow the values currently entered in the calculator above, so change any input and this example updates with it. To see the same reducing-balance arithmetic applied to a fresh loan instead of an existing one, use the Loan Calculator.
When should you consider loan prepayment?
Prepayment tends to be worth examining more closely in these situations. None of them is a rule, and the right answer depends on your own finances.
Points that favour prepaying
- A high interest rate compared with what your savings currently earn.
- A long remaining tenure, since there is more future interest left to remove.
- A genuine surplus that sits idle after your emergency fund and near-term goals are funded.
- No prepayment charge on your loan, which is common on floating-rate retail loans.
- A preference for certainty, because the saving is contractual rather than market-dependent.
Points to check before you do
- Emergency fund still intact after the prepayment.
- Costlier debt elsewhere, such as a credit card balance or personal loan, which usually deserves attention first.
- Tax position, if you claim deductions on home loan interest or principal.
- Lender rules on minimum prepayment amount, timing and paperwork.
- Alternative uses of the money, including goals that a locked-in loan repayment cannot fund.
Comparing prepayment against investing the same amount is a separate calculation with a different kind of uncertainty: a loan saving is fixed, an investment return is not. If you want to model the other side, the SIP Calculator and the Compound Interest Calculator show how the same amount could grow at an assumed rate.
When prepayment may not be the best choice
A large interest saving on paper does not automatically make prepayment the right move. Common situations where borrowers reconsider:
- The emergency fund would be drained. Money paid into a loan is difficult to get back. If a job loss or medical expense follows, you may end up borrowing at a higher rate.
- Higher-cost debt is outstanding. Paying down a 36% credit card balance saves more per rupee than prepaying a 9% home loan.
- The loan terms are already favourable. On an old, low-rate loan the saving may be small relative to what the money could do elsewhere.
- Charges or conditions reduce the benefit. A prepayment fee, an EMI reset fee, or a lock-in period changes the arithmetic, particularly on fixed-rate loans.
- Liquidity is needed soon. School fees, a planned purchase or a business commitment in the next year or two may matter more than the interest saved.
- Tax deductions are material. Deductions do not make a loan free, but they do reduce its effective cost, which is worth including in your own comparison.
This is educational information, not advice on your specific circumstances. A qualified financial adviser or your lender can take your full position into account.
What affects your actual savings
The calculator uses standard reducing-balance mathematics. Your lender's statement may differ for reasons like these:
- Interest rate changes. Floating-rate loans are linked to an external benchmark such as the repo rate, so the rate you enter today may not hold for the full tenure.
- When the prepayment is credited. Lenders apply prepayments on a specific date or cycle, and a few days can shift the numbers slightly.
- Rounding. Lenders round the EMI, and the final instalment is usually a different, smaller amount.
- Prepayment charges. Under the Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, which apply to loans sanctioned or renewed on or after 1 January 2026, regulated lenders cannot levy prepayment charges on floating-rate loans given to individuals for non-business purposes, regardless of the source of funds or whether there is a co-borrower. Business-purpose loans to individuals and micro and small enterprises are covered too, subject to the lender's category and loan size. Fixed-rate loans and loans outside this scope may still carry charges, which must be disclosed in the sanction letter, loan agreement and Key Facts Statement. Check your own documents.
- Interest already accrued. Interest charged up to the prepayment date is still payable.
- Insurance and other add-ons bundled into the loan account, which this calculator does not model.
Frequently asked questions
What is a loan prepayment?
Loan prepayment is the payment of part or all of an outstanding loan principal before the originally scheduled repayment date. Paying a portion is called part-prepayment; clearing the entire balance is usually called foreclosure or preclosure.
How does loan prepayment reduce interest?
On a reducing-balance loan, each month's interest is calculated on the principal outstanding at that time. A prepayment lowers that principal at once, so interest from the next instalment onwards is charged on a smaller amount. Because that reduction applies to every remaining month, the total saving is far larger than one month's interest on the prepaid sum.
Is it better to reduce EMI or loan tenure after prepayment?
Reducing tenure saves more interest because you keep paying the same EMI against a smaller balance. Reducing EMI saves less interest but lowers your monthly outgo immediately. Which is better depends on whether your priority is total cost or monthly cash flow. Switch between the two options in the calculator above to see the difference in your own numbers.
How is prepayment interest saving calculated?
The remaining interest without prepayment is calculated first, using the EMI formula EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the outstanding principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months left. The same schedule is then rebuilt on the reduced principal, month by month. The difference between the two interest totals is the saving.
Can I make a partial prepayment on a home loan?
Most lenders in India allow part-prepayment on home loans, usually through net banking, the lender's app or a branch request. Conditions vary: some set a minimum amount, a limit on how many prepayments you can make in a year, or a required notice period. Confirm the process with your lender before transferring funds, and get written confirmation of how the prepayment has been applied.
Does prepayment reduce EMI?
Only if you ask for it. The default at most lenders is to keep the EMI unchanged and shorten the tenure. If you want a lower EMI instead, you generally have to request an EMI reset, and some lenders charge a fee or restrict how often it can be done.
Does prepayment reduce loan tenure?
Yes, when the EMI is kept unchanged. Each instalment then repays more principal than the original schedule required, so the balance reaches zero sooner. The calculator above shows how many months earlier for your loan.
How much should I prepay on my home loan?
There is no standard figure. A common approach is to prepay whatever remains after your emergency fund, insurance premiums, near-term goals and any higher-interest debt are covered. Model a few amounts in the calculator to see how the saving changes; the relationship is close to proportional, so half the prepayment usually removes roughly half the saving.
Does this prepayment calculator include prepayment charges?
No. The calculator shows interest and tenure effects only. If your loan carries a prepayment charge, EMI reset fee or documentation charge, subtract it from the interest saved to get the net benefit. Floating-rate loans to individuals for non-business purposes generally cannot be charged a prepayment fee under RBI rules, but fixed-rate loans may be.
Can I use this calculator for personal loans and car loans?
Yes. Any loan repaid through a fixed EMI on a reducing-balance basis works the same way, including personal, car, education and business term loans. Enter the outstanding principal, the current rate and the months remaining. Personal and car loans more often carry foreclosure conditions or lock-in periods, so check your agreement.
How accurate is the prepayment calculator?
The arithmetic follows standard reducing-balance amortisation and is internally consistent, but it is an estimate of your actual loan. Differences arise from interest rate revisions, the date your lender applies the prepayment, EMI rounding, fees and taxes. Treat the output as a planning figure and rely on your lender's amortisation schedule for exact amounts.
What information do I need before using it?
Four things, all available on your loan statement or in net banking: the principal still outstanding (not the amount originally sanctioned), your current annual interest rate, the number of months left in the tenure, and the amount you plan to prepay.
Other Arthzo calculators for this decision
Disclaimer. This calculator provides estimates for educational and planning purposes. Actual loan interest, EMI, tenure and prepayment benefits may differ based on your lender's calculation method, loan agreement, interest-rate changes, fees, taxes and prepayment conditions. Check your loan documents or lender for exact figures. Arthzo does not provide personalised financial advice.