Loan Prepayment Calculator
Key takeaways
- A ₹5.00 L prepayment against the ₹30.00 L outstanding removes ₹16.93 L of interest — ₹3.39 for every ₹1 prepaid.
- The EMI stays ₹26,991.78; the loan closes in 159 months instead of 240 — 81 months earlier.
- Applied as “Reduce EMI” instead, the same lump sum removes ₹5.80 L of interest, against ₹16.93 L here.
Remaining interest — without vs with the prepayment
The gap between the bars is the “Interest saved” figure above. The prepayment itself is principal returned, not part of the cost.
Month-by-month comparison
Rows show the loan WITH the ₹5.00 L prepayment applied; “Interest avoided” compares each month against the same loan without it, which runs all 240 months. At the unchanged EMI it clears in month 159 — every later row’s interest is avoided entirely.
| Year | Interest paid | Interest avoided | Balance |
|---|---|---|---|
| 1 | ₹2.21 L | ₹46,903 | ₹23.97 L |
| 2 | ₹2.11 L | ₹51,303 | ₹22.84 L |
| 3 | ₹2.01 L | ₹56,116 | ₹21.61 L |
| 4 | ₹1.89 L | ₹61,380 | ₹20.26 L |
| 5 | ₹1.76 L | ₹67,138 | ₹18.78 L |
| 6 | ₹1.63 L | ₹73,436 | ₹17.17 L |
About the Loan Prepayment Calculator
A prepayment is a lump sum paid towards an existing loan on top of the regular EMI schedule, and it goes straight to the outstanding principal. Because interest is charged on whatever principal is still outstanding, cutting that principal removes the interest that would have accrued on it for the rest of the tenure.
There are two ways a lender can apply a prepayment, and this calculator computes both. "Reduce tenure" keeps the EMI exactly where it is, so the smaller balance clears in fewer months. "Reduce EMI" keeps the remaining tenure exactly where it is, so each future instalment becomes smaller. Whichever mode applies, "interest saved" is the interest that would have been paid without the prepayment minus the interest paid with it — the prepayment itself is a return of principal and is never counted as a cost.
Only the figure your chosen mode actually changes is shown: the other reads "—", because it is left untouched in that mode. If the prepayment covers the whole outstanding principal, the loan closes immediately: the new tenure is 0, there is no further EMI, and every rupee of remaining interest is removed.
Frequently asked questions
How much interest does a prepayment remove?
It is the old total interest minus the new total interest: EMI × remaining months − outstanding, less the same figure recomputed after the prepayment. That subtraction is what this calculator reports. It is not "(old EMI − new EMI) × months", which double-counts the prepaid principal coming back as a smaller instalment.
Reduce tenure or reduce EMI — what is the arithmetic difference?
For the same lump sum, reduce-tenure removes more total interest, because the loan is closed out sooner instead of continuing to accrue interest at a lower monthly cost for just as long. Reduce-EMI lowers the monthly outflow instead and leaves the tenure alone. Switching the mode field recomputes both figures, and the takeaways below the result state what each one removes.
Why is the new tenure a whole number when the formula gives a fraction?
Solving the EMI formula for the number of months generally gives a fractional n — the loan finishes partway through its last month. The tenure shown rounds that up, because there is no fractional final instalment in practice. The interest saved is still computed from the exact unrounded figure, since rounding first would credit a slice of a final EMI that is never paid.
Do lenders charge for prepaying?
Under RBI rules, banks and NBFCs cannot levy foreclosure or prepayment charges on floating-rate loans taken by individuals for non-business purposes. Fixed-rate loans, and loans to businesses, can carry a charge — commonly 2–5% of the amount prepaid. This calculator does not model any such charge; read it off your loan agreement.
Does a prepayment change the interest already paid?
No. It only affects interest that has not yet accrued. That is why prepaying earlier in a tenure removes more than prepaying later: there are more months of interest that the reduced balance never accrues.
Disclaimer: This calculator is for information and education only. It is not investment advice and not a recommendation, and it is not a loan offer. The lender decides the actual interest rate, EMI, fees and eligibility, and whether insurance cover is required, and a floating rate can change during the loan. Charges you did not enter are not included. Every figure is computed solely by applying the formula and assumptions stated on this page to the inputs you entered.