Worked example
Example with the default numbers — change them above.
Loan amount: ₹50,00,000 · Interest rate (per year): 8.5% · Original loan tenure: 20 yrs · EMIs paid before you prepay: 24 · One-time prepayment: ₹5,00,000 · Use the prepayment to: Cut tenure (same EMI) · Extra payment every month: ₹0
Prepaying ₹5 L after 24 EMIs saves ₹14.57 L of interest (26.9%) and clears the loan 3 yrs 9 mo earlier.
| Interest saved | ₹14.57 L · 26.9% of the original interest |
|---|---|
| Tenure cut | 3 yrs 9 mo · 18.8% shorter; now 16 yrs 3 mo |
| New total payout | ₹89.57 L · was ₹1.04 Cr |
| EMI after prepayment | ₹43,391 · unchanged |
| Owed when you prepay | ₹47.92 L · you prepay ₹5 L of it |
How the Loan Prepayment Calculator works
- Enter your original loan amount, rate and tenure, the number of EMIs paid so far and the amount you plan to prepay.
- The calculator builds your original month-by-month schedule, where early EMIs are mostly interest.
- It then applies your prepayment right after the chosen EMI. The amount reduces the principal immediately.
- If you cut the tenure, the EMI stays the same and the loan ends sooner. If you cut the EMI, the tenure stays the same and the EMI is recalculated on the lower balance.
- A monthly extra payment, if you add one, is applied every month and always shortens the tenure.
- The comparison shows interest, total payout and time to clear the loan before and after, with the saving in rupees and as a percentage.
How the schedule changes
Monthly interest = balance at the start of the month × yearly rate ÷ 12 ÷ 100
Principal repaid = EMI − monthly interest
After a prepayment: new balance = balance − prepayment
Cut EMI: new EMI = balance × r × (1 + r)^m ÷ ((1 + r)^m − 1), with m months left
Interest saved = original total interest − new total interestAssumptions and limits
- Interest is charged monthly on the reducing balance at a rate that stays the same. For a floating-rate loan, a rate change will alter the real result.
- The balance at the time of prepayment is rebuilt from your original loan, the rate you enter and the full tenure. If your rate changed during the loan, your lender's outstanding balance will differ; use your statement for the exact figure.
- The prepayment is made right after an EMI and is applied to principal on the same day.
- No prepayment charge is assumed unless you enter one, and a charge you enter is taken as the full cost, so include GST (usually 18%). RBI's Pre-payment Charges Directions, 2025 bar prepayment and foreclosure charges on floating-rate loans to individuals, and on most floating-rate business loans to individuals and small enterprises, sanctioned or renewed from 1 January 2026; earlier RBI rules already barred them on floating-rate personal (non-business) loans. Fixed-rate loans, and loans in a fixed-rate phase, can carry a charge, but only if it is written in your sanction letter and Key Facts Statement.
- EMIs are rounded to the nearest rupee and the last EMI is adjusted to clear the loan.
- The tax effect of paying less interest is not included.
Frequently asked questions
How does loan prepayment reduce interest?
Interest each month is charged on the balance you still owe. A prepayment lowers that balance at once, so every later month's interest is smaller. On a ₹50 lakh loan at 8.5% over 20 years, prepaying ₹5 lakh after 24 EMIs saves about ₹14.57 lakh of interest, 26.9% of the original, and cuts 45 months from the loan.
Should I reduce my tenure or my EMI after a prepayment?
Cutting the tenure saves more interest. In the same example, keeping the EMI saves about ₹14.57 lakh, while lowering the EMI from ₹43,391 to ₹38,864 saves about ₹4.78 lakh. Lowering the EMI eases monthly cash flow. Pick the tenure option if you can afford the current EMI.
Does it matter when I make the prepayment?
Yes, earlier is much better because the balance, and so the interest, is highest at the start. Prepaying ₹5 lakh on the ₹50 lakh loan after 12 EMIs saves about ₹16.04 lakh of interest, after 60 EMIs about ₹10.69 lakh and after 120 EMIs about ₹5.71 lakh.
Are there charges for prepaying a loan?
Not on most floating-rate loans to individuals. RBI's Pre-payment Charges Directions, 2025 bar prepayment and foreclosure charges on floating-rate loans to individuals, and on most floating-rate business loans to individuals and small enterprises, sanctioned or renewed from 1 January 2026; earlier RBI rules already barred them on floating-rate personal (non-business) loans. Fixed-rate loans, and loans in a fixed-rate phase, can carry a charge, but only if it is written in your sanction letter and Key Facts Statement. Enter any charge in the advanced options to see the interest you save after that cost.
Is a small extra payment every month better than one big prepayment?
Both work because they cut principal. On the ₹50 lakh loan, paying ₹5,000 extra every month from the start saves about ₹13.89 lakh of interest and ends the loan about 53 months early. A one-time ₹5 lakh after 24 EMIs saves slightly more, but needs the lump sum. Combine both in the calculator.
Should I prepay my loan or invest the money instead?
Prepaying earns a known return equal to your loan rate, with no market risk, less any tax deduction on loan interest you give up. Investing may earn more but is not guaranteed and may be taxed. Your rate, tax situation, emergency fund and comfort with risk all matter. Our guide on prepaying a home loan versus investing walks through it with numbers.
Sources
- RBI (Pre-payment Charges on Loans) Directions, 2025 – no charges on floating-rate loans to individuals sanctioned or renewed from 1 Jan 2026
- RBI: reset of floating interest rate on EMI-based personal loans (your choice of higher EMI or longer tenure)
Logic and rates last verified on .
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Guides that go deeper
See worked examples
Interest saved and months cut by prepaying ₹1 lakh to ₹25 lakh on ₹30 lakh to ₹1.5 crore home loans.
- How much do you save by prepaying ₹1 lakh on a ₹30 lakh home loan? — Saves ₹3.34 L, 1 yr 4 mo sooner
- How much do you save by prepaying ₹3 lakh on a ₹30 lakh home loan? — Saves ₹8.74 L, 3 yrs 9 mo sooner
- How much do you save by prepaying ₹5 lakh on a ₹30 lakh home loan? — Saves ₹12.9 L, 5 yrs 8 mo sooner