Borrowing calculator
Loan Prepayment Calculator
A prepayment does not just reduce your balance — it cancels every rupee of interest that balance would have generated for the rest of the loan. This shows exactly how much, and what it does to your end date.
Your numbers
Keep paying the same instalment and close the loan earlier. This saves the most interest.
Earlier is worth dramatically more — interest you stop is interest you never pay.
A small permanent top-up often beats a large one-off payment.
Interest you would save
Tenure reduced₹14,57,301
Prepaying ₹5,00,000 removes ₹14,57,301 of future interest and closes the loan 3 years 9 months early. Every rupee prepaid saves 2.91 rupees of interest.
- Prepaid
- ₹5,00,000
- New tenure
- 16 years 3 months
- Time saved
- 3 years 9 months
Outstanding balance, both ways
Where the prepaid line meets zero is your new closing date.
- Original loan
- With prepayment
Total interest paid
The difference between the two bars is money that never leaves your account.
Side by side
The same loan, with and without the prepayment.
| Measure | Original | With prepayment |
|---|---|---|
| Monthly EMI | ₹43,391.16 | ₹43,391.16 |
| Tenure | 20 years | 16 years 3 months |
| Total interest | ₹54,13,879 | ₹39,56,578 |
| Total outgo | ₹1,04,13,879 | ₹94,56,578 |
Total outgo for the prepaid loan includes the prepayment itself, so the two columns are comparable.
The arithmetic
How this calculator works
No proprietary model, no adjustment factor we will not name. This is the standard formula, applied exactly as written.
Both loans are amortised month by month:
interest = balance × r
principal = EMI − interest
balance = balance − principal − prepayment
Repeat until balance ≤ 0.
interest saved = Σ interest (original) − Σ interest (prepaid)- r
- Monthly rate — annual ÷ 12 ÷ 100
- EMI
- The instalment, unchanged under the shorter-tenure option
- prepayment
- Any lump sum or recurring extra paid that month
- Σ
- Sum across the whole life of the loan
- There is no closed-form shortcut here. Because a prepayment changes the balance that all later interest is calculated on, the only honest way to compute the saving is to run both loans in parallel and compare the totals.
- Under the reduce-EMI option, the instalment is re-struck on the remaining balance for the remaining tenure at the moment the lump sum lands.
Worked example
The same maths, on real numbers
A ₹50,00,000 loan at 8.5% over twenty years, with a ₹5,00,000 bonus put against it at the end of year two, keeping the EMI unchanged.
| Original loan | ₹50,00,000 at 8.5% |
|---|---|
| Original tenure | 20 years |
| Prepayment | ₹5,00,000 in year 2 |
| Option chosen | Reduce tenure |
| Interest saved | ₹14,57,301 |
| Loan closes early by | 3 years 9 months |
| Saved per rupee prepaid | ₹2.91 |
Five lakh removes more than fourteen and a half lakh of future interest — a return no fixed-income product can match, and it is certain rather than expected. Make the same payment in year twelve instead and the saving falls by well over half, because there is far less remaining interest left to cancel. With prepayments, timing is not a detail; it is most of the answer.
What this calculator assumes
- The lender applies the prepayment to principal immediately, with no waiting period.
- The interest rate is unchanged before and after the prepayment.
- Under the reduce-tenure option the EMI stays exactly as it was.
- Total outgo for the prepaid loan includes the prepayment itself, so both columns are directly comparable.
What it deliberately leaves out
- Prepayment charges are not modelled. Floating-rate home loans to individuals cannot be charged a penalty in India, but fixed-rate loans and most personal loans can.
- The opportunity cost of the money is not considered. Prepaying an 8.5% loan is a guaranteed 8.5% return — compare that against what the same money might earn elsewhere, after tax.
- If you claim a deduction on home loan interest under the old regime, prepaying reduces that deduction. The saving shown here is before any tax effect.
Questions about the loan prepayment calculation
Reducing the tenure saves substantially more interest, because you keep paying at the original rate against a smaller balance. Reducing the EMI saves less but frees up monthly cash flow, which matters if the budget is tight or the income is uncertain. Run both options above and read the difference before deciding.
Prepaying gives you a certain, tax-free return equal to your loan rate. Investing offers a higher expected return with no certainty at all. A common resolution is to prepay high-cost debt without hesitation, and to split the decision on a cheap home loan — which is what most people actually do.
More than most people expect. Adding ₹5,000 to a ₹43,000 EMI on a twenty-year loan can close it roughly three years early, because every extra rupee lands directly on principal and stops compounding immediately. Recurring extras also beat waiting for a bonus, since they start working sooner.
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