Loan Prepayment Calculator – Save Interest on Your Loan

See how much interest and time you save by making extra payments on your home loan, car loan, or personal loan

Original Total Interest
₹0
New Total Interest
₹0
Interest Saved
₹0
Time Saved
0 months
📢 Advertisement Space — Google AdSense

What is Loan Prepayment? – Complete Guide for Indian Borrowers

Loan prepayment means paying an extra amount towards your loan principal beyond your regular EMI. This directly reduces your outstanding balance, which means less interest accrues in subsequent months. The result? You either finish your loan sooner, pay a lower EMI, or both — saving lakhs in interest over the loan tenure.

How Prepayment Works

When you make a prepayment, the extra amount goes entirely towards reducing the principal balance. Since interest is calculated on the outstanding principal each month, a lower balance means less interest. Our calculator supports four prepayment frequencies — yearly, half-yearly, quarterly, and one-time — so you can plan based on your financial situation.

RBI Rules on Prepayment in India

As per RBI guidelines, banks cannot charge prepayment penalty on floating-rate home loans. This makes it very attractive for home loan borrowers to make regular prepayments. For fixed-rate loans, banks may charge a nominal fee (usually 2% of the prepaid amount). Always check your loan agreement for specific terms.

Should You Prepay or Invest?

Compare your loan interest rate with expected investment returns. If your home loan is at 9% and you can earn 12%+ in equity mutual funds, investing might be better. But prepayment offers guaranteed, risk-free savings. Use our EMI Calculator to compare scenarios, or plan your investments with the SIP Calculator.

Frequently Asked Questions – Loan Prepayment

What is loan prepayment?
Loan prepayment is paying extra towards your loan principal beyond the regular EMI. This reduces the outstanding balance, lowering total interest paid and potentially shortening your loan tenure. It's one of the most effective ways to save money on a loan.
Is there a penalty for prepaying home loan in India?
No. As per RBI guidelines, floating-rate home loans in India have zero prepayment penalty. Fixed-rate loans may have a small penalty (up to 2%). Since most home loans in India are floating-rate, most borrowers can prepay freely.
How much interest can I save with prepayment?
Savings depend on loan amount, rate, and prepayment frequency. For example, a yearly prepayment of ₹1 lakh on a ₹20 lakh loan at 9% for 20 years can save ₹5+ lakhs in interest and cut your tenure by 5+ years.
Should I prepay or invest the extra money?
If your loan rate (say 9%) is higher than your after-tax investment returns, prepay. If you can earn more than your loan rate (e.g., 12% in equity SIPs), investing may be better. However, prepayment offers guaranteed savings with zero risk.
Which is better — reducing EMI or reducing tenure?
Reducing tenure saves more total interest because you pay EMI for fewer months. Reducing EMI gives you more monthly cash flow flexibility. For maximum savings, choose tenure reduction after prepayment.