Loan Prepayment Calculator
See how a part-prepayment reduces your loan tenure or EMI and how much interest you save.
Interest saved
Before and after
| Without prepayment | With prepayment | |
|---|---|---|
| Monthly EMI | ₹25,357 | ₹25,357 |
| One-time prepayment | — | ₹2,00,000 |
| Loan closes in | 15 years | 12 years 9 months |
| Total interest | ₹20,64,200 | ₹15,69,876 |
| Total paid (incl. prepayment) | ₹45,64,200 | ₹40,69,876 |
The last EMI can be smaller than the others when the tenure is shortened. Prepayment charges, if any, are not included.
How it works
Your current EMI comes from the standard reducing-balance formula:
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- P = outstanding loan amount
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = remaining tenure in months
Reduce EMI (keep tenure)
The prepayment lowers the balance to P − A, and the EMI is recalculated over the same n months:
New EMI = (P − A) × r × (1 + r)n ÷ ((1 + r)n − 1)
Reduce tenure (keep EMI)
You keep paying the same EMI on the lower balance B = P − A, so the loan ends after
months = −ln(1 − B × r ÷ EMI) ÷ ln(1 + r), rounded up
The last month's payment is only what is left, so it can be smaller than the EMI. With an extra monthly payment X, the calculator does the same with B = P and a monthly payment of EMI + X.
In every case, interest saved = total interest without prepayment − total interest with prepayment. A one-time prepayment is assumed to be made today, just before your next EMI. At 0% interest, prepaying shortens the loan but saves no interest.
Worked example
You owe ₹25,00,000 (25 lakh) at 9%with 15 years (180 months) left, and prepay₹2,00,000 once.
- Monthly rate r = 9 ÷ 12 ÷ 100 = 0.0075
- Current EMI = ₹25,356.66
- Interest without prepayment = ₹25,356.66 × 180 − ₹25,00,000 = ₹20,64,200
- Balance after prepaying = ₹25,00,000 − ₹2,00,000 = ₹23,00,000
Reduce tenure (keep EMI):
- months = −ln(1 − 23,00,000 × 0.0075 ÷ 25,356.66) ÷ ln(1 + 0.0075) = 152.62, rounded up to153 months (12 years 9 months)
- The loan closes 2 years 3 months earlier; the last payment is ₹15,662.68
- Interest with prepayment = ₹15,69,876
- Interest saved = ₹4,94,324
Reduce EMI (keep tenure):
- New EMI on ₹23,00,000 over 180 months = ₹23,328.13
- Interest with prepayment = ₹23,328.13 × 180 − ₹23,00,000 = ₹18,99,064
- Interest saved = ₹1,65,136
The same ₹2,00,000 saves more interest when you keep the EMI and shorten the tenure.
Frequently asked questions
What is a loan part-prepayment?
A part-prepayment is money you pay towards your loan on top of your regular EMIs. It goes straight to reducing the outstanding principal, so you pay interest on a smaller balance from then on. You can pay a one-time amount (for example, from a bonus) or a fixed extra amount every month.
Should I reduce my EMI or my tenure after prepaying?
For the same prepayment, keeping the EMI and reducing the tenure saves more interest, because your balance keeps falling faster. Reducing the EMI keeps the original tenure but lowers your monthly outgo, which helps if your budget is tight. Use both modes above to see the difference for your loan.
Will my lender charge a fee for prepaying?
Prepayment charges depend on your loan type and your lender. Check your loan agreement and key fact statement. This calculator does not include any charges.
Can I choose whether my lender cuts my EMI or my tenure?
This depends on your lender. Some apply one option by default and some let you choose when you prepay. Ask your lender which option it will apply before you pay, and check your updated repayment schedule afterwards.
Why does the extra monthly payment option only reduce the tenure?
When you pay a fixed extra amount every month, your EMI stays the same and the extra goes to principal, so the loan simply ends sooner. Lowering the EMI would need the lender to recalculate it after every payment, which is not how a regular extra payment usually works. To see a lower EMI, use a one-time prepayment with "Reduce EMI".
When is the best time to prepay?
Earlier is better. Interest is charged on the outstanding balance, so in the early years most of each EMI is interest. A prepayment made early removes principal that would otherwise have carried interest for many years, so it saves more than the same amount paid near the end of the loan.
Why might my lender's figures differ from this calculator?
This calculator assumes a one-time prepayment is made today, just before your next EMI, and that interest is charged monthly on the balance. Lenders may calculate interest daily, apply the prepayment on a different date, round the EMI, or include charges. Use the result as an estimate and check the revised schedule from your lender.