Loan Prepayment Calculator

A part-payment, or prepayment, is any amount you pay towards a loan over and above your regular EMIs. It reduces the outstanding principal straight away. After a prepayment, lenders usually let you choose between two options: keep the EMI and shorten the tenure, or keep the tenure and lower the EMI. This calculator compares both choices for a one-time part-payment.

How to use this calculator

1. Enter the original loan amount, interest rate and tenure.
2. Enter how many EMIs you have already paid.
3. Enter the one-time prepayment amount.
4. Compare the two results: the new tenure if the EMI stays the same, and the new EMI if the tenure stays the same, along with the interest saved in each case.

Formula

Original EMI: E = P × r × (1+r)^n / ((1+r)^n − 1)

Outstanding balance after k EMIs:

B = P × (1 + r)^k − E × ((1 + r)^k − 1) / r

New balance after prepayment: B′ = B − prepayment.

Option A, reduce tenure (EMI unchanged):

n′ = −ln(1 − B′ × r / E) / ln(1 + r)

Option B, reduce EMI (tenure unchanged):

E′ = B′ × r × (1 + r)^m / ((1 + r)^m − 1)

• P = original loan amount, r = monthly rate (annual % ÷ 12 ÷ 100), n = original tenure in months
• k = EMIs already paid, m = n − k remaining months
• n′ = new number of remaining EMIs, E′ = new EMI

Interest saved = remaining interest before prepayment − remaining interest after.

Worked example

Home loan of ₹30 lakh at 8.5% for 20 years. EMI is about ₹26,035. After 3 years (36 EMIs) the outstanding balance is about ₹28.05 lakh. You prepay ₹3 lakh, leaving about ₹25.05 lakh.

Without prepayment, the remaining 204 EMIs would carry about ₹25.06 lakh of interest.

With Option A, the loan ends about 3.5 years earlier and the ₹3 lakh prepayment saves nearly ₹8 lakh in interest. Option B saves far less but lowers the monthly outgo by about ₹2,785.

Things to keep in mind

• Prepayment charges. Under the RBI's Pre-payment Charges on Loans Directions, 2025, lenders cannot levy prepayment charges on floating-rate loans to individuals for non-business purposes, for loans sanctioned or renewed on or after 1 January 2026. Fixed-rate loans and some business loans may still attract a fee, which reduces the net saving.
• Constant rate assumed. The calculation holds the interest rate fixed. On a floating-rate loan, future rate changes will alter both options.
• Lender's process. Some lenders apply prepayments to reduce tenure by default. Confirm the option in writing and ask for a revised repayment schedule.
• Tax effect. Under the old tax regime, home loan interest on a self-occupied house is deductible within limits. Prepaying reduces future interest and so the deduction. In the new regime this deduction is not available for self-occupied homes.
• Liquidity first. Keep an emergency fund before prepaying. Money put into a loan is hard to get back.
• Compare alternatives. The saving from prepayment equals your loan rate, risk-free. Whether investing instead makes sense depends on the expected return after tax and the risk you accept.

The results are estimates for comparison only. Your lender's statement is the final reference.