Loan Prepayment Calculator
Estimate how a lump-sum part payment changes your interest, EMI, payoff time and total outflow. Compare reducing tenure with reducing EMI, then subtract any disclosed prepayment charge and tax to see the net benefit.
Calculate Your Loan Prepayment Savings
Use the outstanding balance, nominal rate and remaining tenure from your latest loan statement.
Net savings equals interest avoided minus the modeled charge and tax. The principal prepayment is not treated as a cost because the same principal would otherwise be repaid through future EMIs.
Strategy comparison
| Strategy | New EMI | New tenure | Interest after | Net savings |
|---|
| Month | Opening balance | Payment | Principal | Interest | Closing balance |
|---|
Related EMI and Loan Calculators
Use these tools to confirm the base EMI, compare offers and inspect the loan schedule before making a part payment.
What Is a Loan Prepayment Calculator?
A loan prepayment calculator estimates what happens when you pay part or all of the outstanding principal before the scheduled end date. The extra payment reduces the balance on which future interest is calculated. Depending on lender policy, you may keep the EMI unchanged and finish earlier, or keep the remaining tenure and reduce the EMI.
This calculator compares both choices from the same starting point. It shows the current EMI, interest remaining without prepayment, interest after prepayment, revised EMI, revised tenure and total cash outflow. It also deducts the entered prepayment charge and tax from gross interest savings.
Use the result as a planning check for a home loan, car loan, personal loan or another monthly reducing-balance loan. It does not replace the lender's official part-payment illustration or foreclosure statement.
How to Use This Calculator
- Choose whether you want to reduce the tenure or reduce the EMI after prepayment.
- Enter the outstanding principal from your latest statement. Do not enter the original loan amount.
- Enter the current nominal annual interest rate used for your EMI calculation.
- Add the number of monthly instalments remaining.
- Enter the lump-sum amount that the lender will apply directly to principal.
- Add the disclosed prepayment charge and tax. Use zero when the lender confirms that no charge applies.
- Select Calculate Savings. Review both strategies, not only the main result.
- Download the selected repayment schedule and compare it with the lender's revised schedule.
Loan Prepayment Formula
The calculator first estimates the current EMI through the standard monthly reducing-balance formula:
- P is the outstanding principal before prepayment.
- r is the monthly rate, annual nominal rate ÷ 12 ÷ 100.
- n is the number of monthly instalments remaining.
After the lump sum is applied, revised principal equals outstanding principal minus prepayment. Under the reduce-tenure choice, the calculator keeps the original EMI and continues the schedule until the new balance reaches zero. Under the reduce-EMI choice, it recalculates EMI from the smaller principal across the original remaining months.
At 0% interest, EMI equals principal divided by months. A prepayment then lowers EMI or time, but it creates no interest saving. If a charge applies, net savings can be negative.
Worked example
Assume ₹25,00,000 remains on a loan at 8.5% with 180 months left. The estimated current EMI is ₹24,618.49. You make a ₹5,00,000 prepayment with no charge.
| Result | Reduce tenure | Reduce EMI |
|---|---|---|
| EMI after prepayment | ₹24,618.49 | ₹19,694.79 |
| New tenure | 122 months | 180 months |
| Time saved | 58 months | 0 months |
| Interest after prepayment | ₹9,88,132.84 | ₹15,45,062.41 |
| Interest saved | ₹9,43,195.17 | ₹3,86,265.60 |
Keeping the EMI produces the larger interest saving because the smaller balance is repaid faster. Reducing EMI frees about ₹4,923.70 each month but keeps the debt outstanding for the full remaining term.
Reduce Tenure vs Reduce EMI
| Choice | Main benefit | Main trade-off | Often suits |
|---|---|---|---|
| Reduce tenure, keep EMI | Usually delivers higher interest savings and an earlier debt-free date. | Your monthly commitment remains close to the current EMI. | Borrowers with stable cash flow and a priority to close debt sooner. |
| Reduce EMI, keep tenure | Immediately lowers the required monthly payment. | Usually saves less interest because the loan remains open longer. | Borrowers who need monthly cash-flow relief or expect higher near-term expenses. |
Reducing tenure is not automatically the right choice for everyone. A lower EMI may protect your emergency fund, prevent new high-cost debt or help manage income uncertainty. Compare the saved interest with the value of stronger monthly liquidity.
Why Early Prepayment Usually Saves More
Interest on a reducing-balance loan is calculated from the outstanding principal. Early in a long loan, the balance is high, so more interest remains to be charged over future months. A principal reduction made at that stage affects many later interest calculations.
The same lump sum paid near the end has fewer months in which to produce savings. Before using cash, compare the calculator's net benefit with your emergency reserve, near-term goals, investment risk and any tax consequences linked to the loan.
Do not use gross interest savings alone. A disclosed prepayment charge, tax, documentation cost or loss of a linked benefit can reduce the economic gain. Obtain a written quote when the amount is large.
Prepayment Charges in India, 2026 Rules
RBI's Pre-payment Charges on Loans Directions, 2025 apply to loans and advances sanctioned or renewed on or after January 1, 2026 by covered banks, co-operative banks, NBFCs and All India Financial Institutions.
For floating-rate loans granted to individuals for purposes other than business, a covered regulated entity must not levy a prepayment charge. The protection applies to part or full prepayment, regardless of the source of funds and without a minimum lock-in. For a dual or special-rate loan, treatment depends on whether the loan is floating at the time of prepayment.
Fixed-rate loans, older contracts and other cases outside the protected categories may follow the lender's approved and disclosed policy. Where a charge is permitted on a term loan, the RBI directions state that it must be based on the amount being prepaid. The sanction letter, loan agreement and applicable KFS must clearly disclose whether a prepayment charge applies. An undisclosed prepayment charge cannot be added later under these directions.
Interest Rate, APR and KFS
Enter the nominal annual interest rate in this calculator. That rate drives the monthly interest calculation. APR is a broader annualised measure that includes interest and applicable charges, so APR should not replace the nominal rate in the amortisation formula.
RBI's harmonised Key Facts Statement framework applies to covered new retail and MSME term loans sanctioned on or after October 1, 2024. The KFS includes an APR computation sheet and an amortisation schedule. It also discloses applicable charges, including third-party charges recovered through the lender.
Compare the calculator with the latest KFS and loan statement. If the loan rate has reset, use the current rate and current remaining term. If the lender uses daily interest, irregular payment dates, a moratorium or a different recalculation method, its official schedule will differ.
Before Making a Part Payment
- Keep an emergency fund before committing surplus cash to the loan.
- Ask for the exact principal outstanding and a dated part-payment quote.
- Confirm the minimum and maximum part-payment amount, if any.
- Tell the lender to apply the money to principal, not future EMIs.
- Choose and document whether EMI or tenure should change.
- Check the prepayment charge, tax and any processing requirement.
- Compare the net saving with other debts carrying higher interest.
- Retain the payment receipt and revised amortisation schedule.
- Verify the next EMI and outstanding balance after the payment posts.
- For full closure, obtain a no-dues certificate and release of collateral documents where applicable.
Calculation Limits
The tool models a fully amortising loan with equal monthly payments, a constant nominal rate and immediate principal application before the next EMI. It does not model daily accrual, broken-period interest, benchmark resets, interest-only periods, moratoriums, balloon payments, overdue amounts, penal charges or lender-specific rounding.
For floating-rate loans, the future rate may change after the prepayment. A lender may also apply a part payment on a different date, require a formal request or recalculate the schedule through its own servicing system. Treat the downloaded schedule as an estimate for comparison.
Frequently Asked Questions
How does a loan prepayment reduce interest?
A prepayment lowers outstanding principal. Future interest is then calculated on a smaller balance, which reduces modeled interest when the loan follows a reducing-balance method.
Should I reduce EMI or tenure after prepayment?
Keeping EMI and reducing tenure usually saves more interest. Keeping tenure and reducing EMI provides more monthly cash-flow relief. Choose based on your repayment goal and financial buffer.
What amount should I enter as outstanding principal?
Use the principal outstanding on your latest lender statement. Do not use the original sanctioned amount, total EMIs remaining or a foreclosure figure that already includes charges.
Does the calculator include prepayment charges?
Yes. Enter the charge as a percentage of the prepayment and the applicable tax rate. The calculator subtracts both from gross interest savings to estimate net savings.
Are prepayment charges allowed on floating-rate loans?
For covered floating-rate non-business loans to individuals sanctioned or renewed from January 1, 2026, RBI directions prohibit prepayment charges. Other cases depend on the applicable rules and disclosed lender policy.
Can I use this as a home loan prepayment calculator?
Yes. Use it for a standard monthly reducing-balance home loan by entering the current balance, rate, months remaining and proposed lump sum. Future floating-rate resets are not predicted.
Can the calculator model full loan closure?
Yes. Enter a prepayment equal to the outstanding principal. The tool will show zero future EMI and tenure, plus any entered charge and tax. Obtain the lender's official foreclosure quote before paying.
Why is net saving lower than interest saved?
Gross interest saved ignores transaction costs. Net saving subtracts the entered prepayment charge and tax, which gives a clearer estimate of the financial benefit.
Does prepayment always save money?
It saves modeled interest when the rate is above zero and the payment reduces principal. Charges can erase the benefit, and using all available cash can create liquidity risk.
Why might my lender's revised schedule differ?
The lender may use daily interest, different payment dates, rate resets, rounding rules, unpaid charges or a different prepayment date. Its written statement and revised schedule control the actual loan.
Methodology and Official Sources
The calculator uses the standard monthly reducing-balance EMI formula. It builds the original and revised schedules from full-precision balances, adjusts the final payment to avoid a negative balance, and subtracts the modeled charge and tax from interest savings.
Last Updated: July 23, 2026
Financial disclaimer: This calculator provides educational estimates, not a loan offer, payoff statement, legal advice, tax advice or financial advice. Actual principal, interest, charges, tax, allocation and revised repayment terms depend on the lender's current records and contract. Confirm every figure in writing before making a prepayment.