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Loan Prepayment Savings Calculator
See how much interest and time you save by paying extra on a home, car or personal loan.
About this tool
Most borrowers know their monthly instalment (EMI) but not how powerful extra payments can be. Because interest on an amortising loan is calculated on the outstanding balance, every additional rupee, dollar or pound you pay early cuts the principal immediately and reduces all future interest.
This calculator compares two scenarios side by side: your original schedule, and a schedule where you add a regular extra payment each month and, optionally, a one-time lump sum at a month of your choice. It shows the new payoff time, total interest paid, and the interest and months you save.
The model uses the standard reducing-balance formula EMI = P × r × (1+r)^n / ((1+r)^n − 1) with monthly compounding. Real lenders may add processing fees, prepayment penalties or day-count differences, so treat the output as an accurate estimate rather than a bank statement.
How to use it
- Enter the loan amount, annual interest rate and tenure in years.
- Add a monthly extra payment and/or a lump sum with the month it will be paid.
- Press Compare to see the savings.
A worked example
A 50,00,000 loan at 8.5% for 20 years has an EMI of about 43,391 and total interest near 54.1 lakh. Adding 5,000 every month saves about 13.9 lakh and ends the loan roughly 53 months early. A single 1,00,000 prepayment in month 12 saves about 3.8 lakh, but the same amount in month 120 saves about 1.3 lakh. Full breakdown: timing of prepayments.
Common mistakes
- Prepaying while holding no emergency fund.
- Asking the bank to reduce the EMI when the goal was to shorten the tenure.
- Ignoring prepayment charges on fixed-rate loans.
Frequently asked questions
Is it better to prepay or invest the money?
It depends on whether your expected after-tax investment return is higher than your loan interest rate. Prepaying gives a guaranteed return equal to the loan rate.
Do banks charge for prepayment?
Rules differ by country and loan type. Floating-rate home loans in India generally carry no prepayment penalty for individuals, but always check your agreement.
Does the extra payment reduce EMI or tenure?
This calculator keeps the EMI constant and shortens the tenure, which usually saves the most interest.
Results are provided for general information. Please read our disclaimer.