worldofcalcsLoan Prepayment Impact
See how adding a fixed extra amount to your monthly EMI reduces total tenure and saves months. Uses standard EMI tenure equations.
Result
Features
- New EMI with prepayment added.
- Months saved and new tenure.
How to Use
- Enter principal, rate, EMI, and extra.
- Review new EMI and tenure.
What is loan prepayment?
Prepaying a loan means paying more than your EMI, either as a one-time lump sum or a fixed extra amount every month. Interest is charged on the outstanding balance, so every extra rupee goes straight to the principal and reduces the interest for all future months. On long loans like home loans, small regular prepayments can shorten the tenure by years. This calculator shows the effect of adding a fixed extra amount to every EMI.
Remaining tenure formula
P is the outstanding loan, r the monthly interest rate (annual rate ÷ 12 ÷ 100) and EMI the monthly payment. The formula gives the number of months n needed to repay the loan. Paying extra raises the effective EMI, so n falls. Interest saved is the difference between the total interest on the original schedule and on the shorter one, assuming the rate stays the same.
Prepayment rules and tips
- Floating-rate loans to individuals carry no prepayment charges: RBI rules bar banks and most NBFCs from charging them. From 1 January 2026 this also covers business loans to individuals and small businesses.
- Fixed-rate loans can carry prepayment or foreclosure charges. Check your loan agreement before prepaying.
- After a prepayment, most lenders keep the EMI the same and shorten the tenure. Shortening the tenure saves more interest; reducing the EMI eases your monthly budget.
- Keep an emergency fund of about six months' expenses before prepaying heavily. Money paid into a loan is hard to get back.
- Compare with investing: prepaying an 8.5% loan is a guaranteed 8.5% return. Under the old tax regime, the deduction of up to ₹2 lakh a year on home loan interest for a self-occupied home lowers your effective rate.
- Ask for an updated loan statement after every prepayment to confirm it was applied to the principal.
Worked example: ₹30 lakh home loan, ₹5,000 extra a month
- Home loan: ₹30,00,000 at 8.5% for 20 years. EMI: ₹26,035. Total interest over 20 years: about ₹32.48 lakh
- Pay ₹5,000 extra every month, so ₹31,035 in total
- The loan now closes in 164 months instead of 240: 76 months (over 6 years) earlier
- Interest saved: ₹11,72,982
- Prepaying early in the loan saves the most, because that's when most of each EMI goes towards interest
Prepaying a ₹30 lakh home loan
₹30,00,000 at 8.5% for 20 years (EMI ₹26,035), with a fixed extra amount paid every month from the start.
| Extra per month | New tenure (months) | Months saved | Interest saved |
|---|---|---|---|
| ₹2,000 | 202 | 38 | ₹6,13,142 |
| ₹5,000 | 164 | 76 | ₹11,72,982 |
| ₹10,000 | 127 | 113 | ₹17,00,000 |
Assumes the interest rate stays the same for the whole loan. Floating rates change, which shifts these figures.