Loan Pre-payment Calculator

See how much interest you can save by making extra lump-sum payments towards your loan.

Your Current Loan

₹
%
Years

Plan Extra Payment

Enter the extra lumpsum amount you want to pay

₹

Total Interest Saved!

₹ 0

Your Loan Will Finish Earlier By:

0 Years, 0 Months

If You DO NOT Pre-pay

Current EMI

₹ 29,542

Total Interest Paid to Bank

₹ 23,17,560
If You PRE-PAY Now

New EMI (assuming tenure remains)

₹ 24,618

OR keep EMI same to finish early

New Total Interest Paid

₹ 14,00,000

How Prepayment Saves You Money — Formulas & Examples

Interest Saved Formula
Savings = Old Total Interest − New Total Interest

Old interest = calculated on original principal for full tenure. New interest = calculated on (Principal − Prepayment) for remaining tenure at same EMI.

Tenure Reduction Formula
New Months = −log(1 − P′×r/EMI) ÷ log(1+r)

Where P′ = reduced principal after prepayment, r = monthly rate, EMI = unchanged old EMI. Months saved = Original months − New months.

Worked Example

Loan: ₹30L @ 8.5% for 15 yrs | EMI: ₹29,542 | Total Interest: ₹23.2L

Prepay ₹5L in Year 3 → New Interest: ₹14.8L | Saved: ₹8.4L | Tenure cuts by 3 yrs 2 months

Prepayment Charges by Loan Type — RBI Rules

Loan TypeRate TypePrepayment Charge
Home LoanFloating RateNIL (RBI mandated)
Home LoanFixed Rate2–3% of outstanding
Personal LoanFixed Rate2–5% (Years 1–2)
0–2% (After 2 yrs)
Car LoanFixed Rate2–4% of principal
Business LoanBoth2–5% (varies)
Education LoanBothUsually NIL
Loan Against PropertyFloatingNIL (RBI mandated)

RBI circular RBI/2011-12/540 prohibits prepayment penalties on all floating-rate loans to individual borrowers. Always check your loan sanction letter for exact terms.

Interest Saved by Prepayment Timing — ₹50L @ 8.5%, 20 Years

Prepay ₹5L inInterest SavedTenure ReducedVerdict
Year 1₹11–13L3.5–4 yrsBest
Year 3₹9–11L2.5–3 yrsExcellent
Year 5₹7–9L2–2.5 yrsGood
Year 10₹3–5L1–1.5 yrsFair
Year 15₹1–2L4–6 monthsLow impact
Best Practices for Loan Prepayment

Use annual bonus, tax refund, or windfall income for lump-sum prepayment — don't deplete emergency fund

Always choose tenure reduction over EMI reduction to maximize interest savings

Collect updated amortization schedule and acknowledgment letter after every prepayment

After full foreclosure: collect original property documents, NOC, and verify CIBIL update within 45 days

Frequently Asked Questions

Prepayment is paying off part or all of your loan before the scheduled tenure ends. Part-prepayment reduces the outstanding principal, leading to lower EMI or shorter tenure. Full prepayment (foreclosure) closes the loan completely. Both reduce total interest paid to the bank.
RBI mandates NO prepayment charges on floating-rate home loans (individual borrowers). Fixed-rate home loans: banks may charge 2–3%. Personal loans: 2–5% in first 1–2 years, then usually nil. Car loans: 2–4% foreclosure charges. Business loans: varies by lender — check the sanction letter.
The earlier you prepay, the greater the interest savings. In the first 1/3 of the tenure, 70–80% of each EMI is interest. A ₹5L prepayment in Year 3 of a 20-year home loan saves 3–4x more interest than the same prepayment in Year 15. Use annual bonus or windfall amounts for best impact.
Reducing tenure saves significantly more total interest and is recommended if your current EMI is manageable. Reducing EMI improves monthly cash flow. Example: ₹50L loan at 8.5%, ₹5L prepayment in Year 3 → Tenure reduction saves ~₹9L in interest; EMI reduction saves ~₹6L. Choose tenure reduction for maximum savings.
Substantial savings are possible. On a ₹50L home loan at 8.5% for 20 years, total interest = ~₹62L. A ₹5L prepayment in Year 3 saves ~₹9–11L in interest and reduces tenure by 2–3 years. Our calculator shows exact savings — enter your specific loan details for a precise figure.
Yes. Section 80C deduction covers principal repayment up to ₹1.5L/year — prepayment principal also qualifies. Section 24(b) allows deduction on interest paid up to ₹2L/year for self-occupied property. After foreclosure, these deductions are no longer available, so factor in the annual tax benefit lost when calculating real savings.
After full loan repayment, the bank must issue an NOC/NDC (No Dues Certificate) confirming the loan is closed. Collect the original property documents, a letter confirming lien removal, and ensure the bank updates CIBIL to show the loan as 'closed'. Failure to update CIBIL can hurt your credit score — follow up within 30–45 days.
Compare after-tax loan rate vs expected post-tax investment return. Home loan at 8.5% (effective after 30% tax benefit on ₹2L interest) = ~7.4% real rate. If equity investments yield 12%+ CAGR, investing beats prepaying mathematically. However, psychological peace of being debt-free and guaranteed interest savings often outweigh uncertain market returns — especially for conservative investors.
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