Loan Prepayment Calculator

Interest saved and tenure cut by prepaying a loan.

Overview

Calculates interest savings and loan tenure reduction achieved by making partial lump-sum prepayments toward loan principal.

Formula & Calculation Method

New Principal = Current Principal - Prepayment | Recalculate Tenure or EMI using Amortisation

Prepayments reduce outstanding principal directly, permanently eliminating future interest on that portion.

Worked Example: Prepaying ₹2,00,000 on a ₹30 Lakh Home Loan

Inputs: Loan Balance = ₹30,00,000 | Rate = 8.5% | Remaining Tenure = 240 Months | Prepayment = ₹2,00,000

  • Principal reduces immediately from ₹30,00,000 to ₹28,00,000
  • Option A (Reduce Tenure): Monthly EMI remains ₹26,035; tenure reduces from 240 months to 207 months (33 months cut)
  • Option B (Reduce EMI): Tenure remains 240 months; monthly EMI drops from ₹26,035 to ₹24,300

Summary: Prepayment = ₹2,00,000 | Tenure Saved = 33 Months (2.75 Years) | Total Interest Saved = ₹5,58,000

Common Use Cases

  • Bonus Utilization: Direct annual corporate bonuses into loan principal to shave years off home mortgages.
  • EMI vs Tenure Decision: Compare the financial advantage of cutting loan tenure versus reducing monthly EMI commitments.
  • Zero Prepayment Penalty Check: Take advantage of RBI mandates that ban prepayment penalties on floating-rate individual home loans.

Frequently Asked Questions

Are banks allowed to charge prepayment penalties on home loans?

No. The Reserve Bank of India strictly prohibits foreclosure charges and prepayment penalties on floating-rate home loans for individual borrowers.

Is it better to reduce tenure or reduce EMI when prepaying?

Reducing tenure saves substantially more total interest; reducing EMI improves immediate monthly household cash flow.

How often can I make prepayments?

Most banks allow partial prepayments at any time throughout the year, either via online net banking or branch visits.

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