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Loan Prepayment Calculator — Calculations & Slabs for FY 2026-27

Enter your outstanding loan balance, rate, and prepayment amount to compare total interest saved under tenure-reduction vs EMI-reduction options.

1. Active Loan Parameters

Frequently Asked Questions (FAQ)

What is loan prepayment and how does it save interest?

Loan prepayment is paying a lump-sum amount towards your loan outstanding balance before its scheduled tenure. Since the prepaid amount goes entirely towards reducing your loan principal, the interest calculated in subsequent months decreases, saving you substantial interest overall.

Is it better to reduce the monthly EMI or the tenure after prepayment?

Reducing the tenure (keeping your EMI amount same) saves significantly more interest than reducing the EMI. Lenders usually default to tenure reduction because it clears the debt much faster and minimizes the bank's interest income.

Do banks charge prepayment fees or penalties on home loans?

According to RBI guidelines, banks and NBFCs cannot charge foreclosure or prepayment penalties on individual floating-rate home loans. However, fixed-rate loans or business loans may attract a prepayment fee of 2% to 4%.

When is the best time in the loan cycle to make a prepayment?

Prepayments made in the early years of your loan yield the highest savings. This is because interest constitutes a massive portion of your EMI during the initial phase. Prepaying late in the loan cycle offers minimal interest savings since most interest has already been paid.

Where can I verify the source data for this calculator?

You can verify the values against the official notifications listed in our data sources section at the bottom of the page.

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About This Calculator

Target Audience: Salaried taxpayers, investors & retirees planning Indian tax & wealth growth

💡 What Does This Calculator Do?

This calculator determines the financial benefit of making a lump-sum prepayment on your active loan. It shows the interest saved and the reduction in loan tenure (months saved) while keeping your monthly EMI the same.

engine_type: compiled | format: inr

📋 How to Use It

  1. 1
    Original Loan Amount (₹): Enter the initial loan amount you borrowed.
  2. 2
    Interest Rate (%/year): Enter the annual interest rate of the loan.
  3. 3
    Original Tenure (Years): Enter the original tenure in years.
  4. 4
    EMIs Paid (months): Enter the number of monthly EMIs you have already paid.
  5. 5
    Prepayment Amount (₹): Enter the lump-sum prepayment amount you plan to pay now.

🧬 The Logic Explained Simply

  • The Concept: When you make a lump-sum prepayment, the entire amount is directly subtracted from your outstanding principal balance. Because your principal drops instantly, the interest accrued in all subsequent months is lower. Keeping the EMI amount constant means your loan is paid off much faster.
  • The Formula:
  • Calculate outstanding balance after n EMIs.
  • Subtract prepayment amount from this balance to get the new outstanding principal.
  • Recalculate the remaining tenure using the original EMI and the new outstanding principal:

Remaining Months = -log(1 - (New Principal × r) / EMI) / log(1 + r)

💡 Real-World Calculation Breakdown

For example, you have a ₹30,00,000 loan at 8.5% interest for 20 years. Your monthly EMI is ₹26,035. After paying 24 EMIs (2 years), you make a prepayment of ₹5,00,000.

  • Outstanding balance after 2 years = ₹28,52,560
  • Balance after prepaying ₹5,00,000 = ₹23,52,560
  • If you continue paying the same EMI of ₹26,035, the loan will be fully paid off in 129 more months instead of the remaining 216 months.
  • Tenure saved = 216 - 129 = 87 months (7.25 years saved!)
  • Total Interest Saved = ₹11,39,120

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