Prepayment Benefit Calculator
Find out exactly how much interest you save and how many months you cut off your loan by making a lump-sum prepayment. Works for home loans, car loans, and personal loans.
Original Loan Details
Prepayment Details
Prepayment made after EMI #12 — at the end of month 12
Monthly EMI
₹26,992
Original Interest
₹34,78,027
New Interest
₹27,15,581
Interest Saved
₹7,62,446
Tenure Comparison
🎉 You save 2 yrs 11 mos of EMIs!
Interest: Before vs After Prepayment
New Total Interest
₹27,15,581 • 78%
Interest Saved
₹7,62,446 • 22%
Your Prepayment Benefit
₹7,62,446 saved
by making a single lump-sum prepayment
Interest Saved
₹7,62,446
Tenure Cut
2 yrs 11 mos
Original Tenure
20 yrs
New Tenure
17 yrs 1 mo
Repayment Schedule
Amortization Schedule
205 EMIs| Month | Opening Balance | EMI | Principal | Interest | Closing Balance |
|---|---|---|---|---|---|
| 1 | ₹30,00,000 | ₹26,992 | ₹4,492 | ₹22,500 | ₹29,95,508 |
| 2 | ₹29,95,508 | ₹26,992 | ₹4,525 | ₹22,466 | ₹29,90,983 |
| 3 | ₹29,90,983 | ₹26,992 | ₹4,559 | ₹22,432 | ₹29,86,423 |
| 4 | ₹29,86,423 | ₹26,992 | ₹4,594 | ₹22,398 | ₹29,81,830 |
| 5 | ₹29,81,830 | ₹26,992 | ₹4,628 | ₹22,364 | ₹29,77,202 |
| 6 | ₹29,77,202 | ₹26,992 | ₹4,663 | ₹22,329 | ₹29,72,539 |
| 7 | ₹29,72,539 | ₹26,992 | ₹4,698 | ₹22,294 | ₹29,67,841 |
| 8 | ₹29,67,841 | ₹26,992 | ₹4,733 | ₹22,259 | ₹29,63,108 |
| 9 | ₹29,63,108 | ₹26,992 | ₹4,768 | ₹22,223 | ₹29,58,340 |
| 10 | ₹29,58,340 | ₹26,992 | ₹4,804 | ₹22,188 | ₹29,53,536 |
| 11 | ₹29,53,536 | ₹26,992 | ₹4,840 | ₹22,152 | ₹29,48,695 |
| 12Prepay | ₹29,48,695 | ₹26,992 | ₹4,877 | ₹22,115 | ₹29,43,819 |
Understanding Loan Prepayment Benefits
When you take a long-tenure loan — especially a home loan — the total interest you pay over the life of the loan can easily exceed the original principal. A ₹30 lakh home loan at 9% for 20 years costs over ₹34 lakhs in interest alone. Making a strategic lump-sum prepayment, even once, can slash this burden dramatically. Our Prepayment Benefit Calculator helps you quantify these savings instantly before you commit.
How Prepayment Reduces Your Interest Cost
Loan interest is computed on the outstanding principal balance every month. When you make a prepayment, it directly reduces the principal. This has a compounding effect:
- Lower principal → less interest each month: Every subsequent EMI carries a smaller interest component and a larger principal component, accelerating your debt payoff.
- Shorter effective tenure: The loan closes earlier than originally scheduled, cutting off months or even years of future interest payments.
- Snowball effect: The fewer months remaining, the more of each EMI goes toward repaying principal — your repayment becomes increasingly efficient.
Should You Reduce EMI or Reduce Tenure?
When you make a prepayment, most lenders offer two choices:
Reduce Tenure (Recommended)
Keep your EMI the same but close the loan earlier. This option saves significantly more total interest and makes you debt-free sooner. Best if your monthly budget allows for the current EMI.
Reduce EMI
Keep the same tenure but lower your monthly payment. This gives you more cash flow each month but saves less total interest compared to reducing the tenure. Best if your income has changed and you need immediate relief.
When is the Best Time to Prepay?
Prepaying early in the loan tenure gives you the maximum benefit. Here's why:
- 🟢 First 5 years: Interest makes up 85–95% of each EMI. Prepaying now cuts the most interest.
- 🟡 Years 6–15: Still beneficial. Interest portion is significant — prepayment saves meaningfully.
- 🔴 Final years: Interest portion is low; savings from prepayment are minimal. Consider investing the money instead.
Tax Implications of Prepayment
If you are claiming a tax deduction on home loan interest under Section 24(b) of the Income Tax Act (up to ₹2 lakh per year for self-occupied property), prepaying reduces your future interest outgo — which also reduces your eligible deduction. Factor in the post-tax cost of your loan before deciding to prepay. As a general rule, if your loan rate is higher than your post-tax investment returns, prepayment is the better choice.
Prepayment Charges — What to Watch Out For
- Floating-rate home loans: The Reserve Bank of India (RBI) mandates zero prepayment penalty for individual borrowers on floating-rate home loans.
- Fixed-rate home loans: Lenders may charge 2–4% of the prepaid amount. Factor this into your savings calculation.
- Personal & car loans: Typically carry a prepayment fee of 1–5%, applied after a lock-in period. Always check your loan agreement.
Frequently Asked Questions
What is a loan prepayment?
A loan prepayment is an extra lump-sum payment made toward your outstanding principal, over and above your regular EMIs. It directly reduces the principal balance, resulting in lower total interest and a shorter loan tenure.
Does prepaying a home loan actually save money?
Yes — substantially. On a ₹50 lakh home loan at 9% for 20 years, prepaying just ₹5 lakh at the end of year 1 can save over ₹15 lakh in interest and close the loan 4–5 years early. Use this calculator to see the exact impact for your specific loan.
Should I invest or prepay my home loan?
Compare the post-tax return on your investment against the post-tax cost of your loan. If your loan rate (after tax benefit) is 6.5% and your investment yields 8%+, investing may be better. If your loan rate exceeds your investment return, prepayment is the safer, guaranteed saving.
Can I make multiple prepayments?
Yes — most lenders allow multiple part-payments throughout the loan tenure. This calculator currently models a single lump-sum prepayment. For multiple prepayments, you can re-run the calculator using the outstanding balance and remaining tenure after each prepayment.
How is the prepayment benefit calculated?
The calculator builds a full amortization schedule for your loan. At the specified month, it deducts the prepayment amount from the outstanding balance and recalculates the remaining schedule. The difference in total interest between the original and new schedules is your interest saving.
Is this calculator free?
Completely free. No sign-up, no login, no hidden fees. Use ZeroKhata's Prepayment Benefit Calculator as many times as you need.