EMI Prepayment Calculator
See exactly how much interest a part-prepayment saves you and how many months it cuts off your loan — for extra monthly payments, a yearly lump sum, or both.
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A regular EMI calculator answers one question: what will I pay every month? This one answers the question that actually saves money — what happens if I pay a bit more than I have to?
The answer is usually larger than people expect, and the reason is that every extra rupee goes straight to principal. Your EMI is fixed by the bank; the interest portion of it is calculated on whatever you still owe. Knock the balance down early and every future month's interest is computed on a smaller number. The saving compounds for the rest of the loan.
A number worth holding on to
Take a ₹25,00,000 home loan at 8.75% for 20 years. The EMI is about ₹22,093, and across 240 months you would repay roughly ₹53.0 lakh — about ₹28.0 lakh of it pure interest.
Now pay ₹5,000 extra every month. Nothing else changes: same rate, same bank, same loan. The loan closes in 12 years and 10 months instead of 20, and total interest drops to roughly ₹16.7 lakh. That single ₹5,000 habit saves about ₹11.4 lakh in interest and buys back more than seven years of your life without the loan.
Look at it as total money leaving your account. Without prepayment you repay ₹53.0 lakh. With it you repay ₹41.7 lakh. The extra ₹5,000 a month adds up to ₹7.7 lakh over those 154 months — and it still leaves you ₹11.4 lakh ahead, because every rupee of it stopped interest from accruing for the rest of the loan.
| Extra paid monthly | Loan closes in | Total interest | Interest saved |
|---|---|---|---|
| Nothing | 20 years | ₹28.0 lakh | — |
| ₹2,000 | 16 yrs 3 mo | ₹21.9 lakh | ₹6.2 lakh |
| ₹5,000 | 12 yrs 10 mo | ₹16.7 lakh | ₹11.4 lakh |
| ₹10,000 | 9 yrs 8 mo | ₹12.1 lakh | ₹15.9 lakh |
| ₹25,000 | 5 yrs 8 mo | ₹6.7 lakh | ₹21.3 lakh |
Reduce the EMI or reduce the tenure?
When you make a part-prepayment, most Indian banks ask which you want. It is not a small question.
- Reduce tenure keeps the EMI the same and ends the loan sooner. This saves dramatically more interest, because the interest you skip is the interest from the last years of the loan.
- Reduce EMI keeps the tenure the same and lowers the monthly outgo. It frees up cash flow now and saves comparatively little.
If you can afford the current EMI, reduce the tenure. The only reason to choose the lower EMI is if the monthly payment is genuinely straining you. This calculator models the reduce-tenure option, which is the one that produces the numbers above.
Timing matters more than amount
Prepayment in year 2 is worth far more than the same amount in year 15, because early EMIs are almost entirely interest. On the ₹25 lakh loan above, the first EMI splits roughly ₹18,229 interest and ₹3,864 principal. By month 200 that has flipped. A lump sum in the first third of the loan removes principal that would otherwise have accrued interest for another fifteen years; the same lump sum near the end removes almost nothing.
What the banks are allowed to charge
Under RBI rules, banks and NBFCs cannot levy a foreclosure or prepayment penalty on floating-rate home loans taken by individuals. That covers most Indian home loans. Fixed-rate loans, and loans to non-individuals, can still carry a charge — typically 2–4% of the outstanding amount. Personal loans and car loans routinely carry prepayment charges, often with a lock-in of 6–12 months before you may prepay at all.
Check your sanction letter before assuming prepayment is free. On a fixed-rate loan a 3% charge on ₹5 lakh is ₹15,000 up front, which can outweigh the saving if you are late in the tenure.
Prepay, or invest the money instead?
The honest comparison is after-tax. A home loan at 8.75% is effectively cheaper than 8.75% if you are claiming the Section 24(b) interest deduction under the old tax regime — at the 30% slab, an 8.75% loan costs roughly 6.1% after tax. Under the new regime there is no such deduction on a self-occupied property, so the full 8.75% is what you pay.
Prepaying is a guaranteed, risk-free 8.75% return. An equity SIP might do better over fifteen years, but might is doing real work in that sentence. A reasonable split many borrowers land on: prepay enough to clear the loan before retirement, invest the rest.
EMI Prepayment — frequently asked questions
Is it better to reduce the EMI or reduce the tenure when I prepay?
Reduce the tenure, if you can comfortably keep paying the current EMI. Cutting the tenure removes the final years of the loan, and those years carry interest you would otherwise pay on a balance that stays outstanding for longer. Reducing the EMI keeps you in the loan for the full original term and saves far less. On a ₹25 lakh, 20-year loan at 8.75%, a ₹5,000 monthly extra saves about ₹11.4 lakh when applied to tenure — choosing the lower-EMI option instead saves a fraction of that.
Will my bank charge me a penalty for prepaying my home loan?
Not on a floating-rate home loan taken by an individual — RBI prohibits foreclosure and prepayment charges on those. Fixed-rate home loans, loans to companies or firms, most personal loans and most car loans can still carry a charge, usually 2–4% of the amount prepaid, sometimes with a 6–12 month lock-in first. Your sanction letter states the exact terms; read that rather than relying on what the branch tells you over the phone.
When is the best time to make a part-prepayment?
As early as possible. Early EMIs are overwhelmingly interest — on a ₹25 lakh loan at 8.75%, the first instalment is about ₹18,229 interest and only ₹3,864 principal. Money you remove from the balance in year 2 stops accruing interest for the remaining eighteen years. The identical amount paid in year 18 has almost nothing left to save. If you receive an annual bonus, applying it every year from the start is worth substantially more than saving it up for one large prepayment later.
Should I prepay my home loan or invest the money in mutual funds?
Prepayment is a guaranteed return equal to your loan rate; equity is a higher expected return with real risk. Compare them after tax. Under the old regime, Section 24(b) lets you deduct home-loan interest, so an 8.75% loan costs roughly 6.1% at the 30% slab — which makes investing more attractive. Under the new regime there is no such deduction on a self-occupied home, so you are genuinely paying 8.75%, and prepaying looks much stronger. Many borrowers split the difference: prepay enough to clear the loan before retirement, invest whatever is left.
Does prepaying affect my CIBIL score?
Closing a loan early is not penalised, and the account is reported as "closed" rather than "settled" — the distinction matters, because "settled" indicates you paid less than you owed and does damage your score. A fully prepaid loan is a positive repayment record. The only mild effect is that closing your oldest credit account slightly shortens your average account age, which is a small factor. It is not a reason to keep a loan running.
How much extra do I need to pay to close a 20-year loan in 15?
On a ₹25,00,000 loan at 8.75% with a ₹22,093 EMI, an extra ₹2,893 a month — about 13% more than the required payment — closes it in 15 years. Push that to ₹5,000 extra and it closes in 12 years and 10 months. A useful reference point: paying one extra EMI a year, spread as roughly ₹1,841 a month, cuts the loan to about 16 years 6 months and saves ₹5.8 lakh. The relationship is steeply non-linear, so run your own numbers on the slider rather than scaling these.
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Results from this calculator are estimates for informational use only — not financial, medical, or professional advice. Read our full disclaimer before acting on any number you see here.