What is a Loan Prepayment?
A prepayment (or part payment) is any amount you pay towards your loan on top of your regular EMIs. It goes straight to the outstanding principal, so every month after that you are charged interest on a smaller balance.
Reduce EMI or Reduce Tenure
After a part payment, lenders usually let you choose:
- Reduce tenure: keep paying the same EMI. The loan closes earlier and you usually save the most interest.
- Reduce EMI: keep the original end date and pay a smaller EMI every month.
Worked example
On a ₹50 lakh home loan at 8.5% for 20 years (EMI ₹43,391), a part payment of ₹5,00,000 after the 24th EMI:
- Reduce tenure: the loan ends 45 months earlier and you save about ₹14,57,301 in interest.
- Reduce EMI: the EMI drops to about ₹38,864 and you save about ₹4,77,894.
Planning Several Part Payments
Use “Add another part payment” above to model, for example, a yearly bonus. Each payment is applied right after the EMI you choose, and the schedule is recalculated from that month. The updated repayment schedule marks every part payment so you can see exactly where it lands.
Before You Prepay
- Charges: floating-rate home loans for individuals have no prepayment penalty in India; fixed-rate, personal and car loans may.
- Emergency fund: keep several months of expenses aside — money paid into a loan is hard to get back.
- Compare returns: prepaying a 9% loan is a guaranteed 9% “return”; weigh that against what you could safely earn elsewhere after tax.
Frequently Asked Questions
When is the best time to prepay a loan?
As early as possible. Interest is charged on the outstanding balance, which is highest in the early years, so a part payment made early removes more future interest than the same payment made later in the tenure.
Should I reduce the EMI or the tenure after a prepayment?
Reducing the tenure usually saves more interest because you keep paying the same EMI and the balance falls faster. Reducing the EMI lowers your monthly outflow while keeping the original end date. The calculator shows both results side by side.
Can I add more than one part payment?
Yes. Add up to ten part payments at different months. They are applied in order, and the schedule is recalculated after each one.
Does the calculator include prepayment charges?
No. Floating-rate home loans to individuals in India have no prepayment penalty under RBI rules, but fixed-rate and many personal or car loans can carry a charge. Subtract any charge from the interest saved to see your net benefit.
Is the EMI calculated by this tool the same as my bank’s EMI?
It uses the standard monthly reducing-balance formula that most Indian banks and NBFCs use, so it should be very close. Your lender’s exact figure can differ slightly because of rounding, the date your first EMI falls on (broken-period interest), processing fees, insurance or a different interest-calculation method. Always confirm with your loan sanction letter.
Does the calculator store my numbers?
No. All calculations run inside your browser. The amounts you enter are not sent to our server or saved anywhere.