Loan Prepayment Calculator
See how extra payments reduce your interest and tenure.
Loan Details
Prepayment Strategy
Results
Loan Balance Projection
Debt-Free Faster
You will be debt-free by Year 15.6 instead of Year 20.0.
Download includes month-wise breakdown of principal, interest, and balance.
| Without Prepay | With Prepay | |
|---|---|---|
| Total Interest | ₹54,13,879 | ₹40,24,629 |
| Loan Tenure | 20 years | 15y 7m |
| Total Payment | ₹1,04,13,879 | ₹90,24,629 |
Tip: Prepaying early in your loan saves more because interest is calculated on the outstanding balance.
How Loan Prepayment Works
When you take a home loan or personal loan, your EMI consists of two parts: principal and interest. In the early years, a major chunk of your EMI goes toward paying interest. As time passes, more of your payment goes toward principal reduction.
Prepayment changes this equation in your favor. When you make an extra payment, the entire amount goes directly toward reducing your principal. This means the interest in subsequent months is calculated on a smaller amount, creating a compounding effect that saves you lakhs over the loan tenure.
Quick Example
Take a ₹50 lakh home loan at 8.5% for 20 years. Your monthly EMI is around ₹43,391. Over 20 years, you'll pay approximately ₹54 lakh as interest – more than the original loan amount!
Now, if you prepay just ₹5,000 extra every month, you'll save over ₹15 lakh in interest and close your loan nearly 5 years earlier. That's the power of consistent prepayment.
Smart Prepayment Strategies for Indian Borrowers
1. Use Annual Bonuses Wisely
Instead of spending your Diwali bonus on shopping, put at least 50% toward your loan. A ₹1 lakh lump sum prepayment in year 3 of a 20-year home loan can save you over ₹2.5 lakh in interest.
2. Increase EMI with Every Salary Hike
Got a 10% raise? Increase your EMI by 5-7%. You won't feel the pinch since you're already earning more, but your loan will close years earlier.
3. Prioritize High-Interest Loans First
If you have multiple loans, prepay personal loans (12-18% interest) before home loans (8-9%). The interest rate difference means you save more by clearing expensive debt first.
4. Don't Deplete Your Emergency Fund
Keep 6 months of expenses as emergency savings before aggressive prepayment. The last thing you want is to prepay aggressively and then take a personal loan for emergencies.
Prepayment Charges by Major Banks (2025)
| Bank | Home Loan | Personal Loan |
|---|---|---|
| SBI | Nil (floating) | 3% of outstanding |
| HDFC Bank | Nil (floating) | 4% of outstanding |
| ICICI Bank | Nil (floating) | 5% of outstanding |
| Axis Bank | Nil (floating) | 4% of outstanding |
| Kotak Mahindra | Nil (floating) | 4% of outstanding |
| Bank of Baroda | Nil (floating) | 3% of outstanding |
* Floating rate home loans have no prepayment penalty as per RBI guidelines. Fixed rate loans may have charges.
Frequently Asked Questions
How much can I save by prepaying my home loan?
The savings depend on your loan amount, interest rate, and when you prepay. For a ₹50 lakh home loan at 8.5% for 20 years, prepaying just ₹5,000 monthly can save you over ₹15 lakh in interest and reduce your tenure by 5+ years. Use the calculator above to see your exact savings.
Is it better to reduce EMI or reduce tenure when prepaying?
Reducing tenure is almost always the smarter choice. When you opt for shorter tenure, your principal reduces faster, which means you pay significantly less interest overall. Reducing EMI gives you immediate cash flow relief, but you end up paying more over time.
Do banks charge prepayment penalty in India?
Good news for home loan borrowers: RBI mandates that banks cannot charge any prepayment penalty on floating rate home loans. For fixed rate loans, banks may charge 2-3%. Personal loans and car loans typically have prepayment charges of 2-5% of outstanding principal.
When is the best time to prepay a loan?
The earlier, the better. In the first few years of your loan, a larger portion of your EMI goes toward interest. Prepaying during this phase directly reduces your principal, leading to substantial savings. If you're already past the halfway mark, the benefits are smaller but still worthwhile.
Should I prepay my loan or invest the money instead?
This depends on your risk appetite. If your loan is at 8.5% and you can reliably earn 12% from investments, the math favors investing. But loan prepayment offers guaranteed, tax-free returns equal to your interest rate. For most people, paying off high-interest personal loans first makes the most sense.
The Prepay vs Invest Debate
Should you prepay your 8.5% home loan or invest in mutual funds that may give 12%? Here's a balanced perspective:
- ✓Prepayment = Guaranteed, risk-free return equal to your interest rate
- ✓Investing = Potentially higher returns, but with market risk
- ✓Hybrid approach = Prepay high-interest loans, invest the rest in ELSS for tax benefits
For most Indians, clearing personal loans and credit card debt should take priority. Once those are done, a balanced approach of partial prepayment and investing works best.