Financial Calculators
Lumpsum Loan Prepayment Calculator
A bonus or arrears against the home loan. Keep the EMI, and watch the tenure fall.
Interest saved if you keep the EMI
₹10,36,194
loan ends 39 months early
- Current EMI
- ₹39,390
- New tenure, same EMI
- 11 years 9 months
- New EMI, same tenure
- ₹34,466
- Interest saved if you cut the EMI
- ₹3,86,266
Keeping the EMI and shortening the tenure saves several times more interest than cutting the EMI, because the prepaid amount stops earning interest for the lender for every remaining month. Floating-rate home loans carry no prepayment charge for individuals; check fixed-rate and other loans.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
One cheque, two ways to use it
A lumpsum part-payment reduces the outstanding principal on the spot. From there the lender can either keep your EMI and finish the loan earlier, or keep the tenure and lower your EMI. The first saves several times more interest than the second, because every rupee prepaid stops earning interest for the bank for every remaining month rather than being spread thin across the same number of them.
The calculator shows both outcomes so you can ask the bank for the right one. Individual borrowers on floating-rate loans pay no prepayment charge.
Shorten the tenure or cut the EMI
New balance = outstanding - prepayment\nSame EMI: new n = -ln(1 - balance x i / EMI) / ln(1 + i)\nSame tenure: new EMI on the new balance over the old nWorked example: on Rs 40,00,000 outstanding at 8.5% with 180 months left (EMI Rs 39,390), a Rs 5,00,000 prepayment with the EMI unchanged ends the loan in 141 months, 39 early, saving Rs 10,36,194 of interest. Keeping the tenure instead drops the EMI to Rs 34,466 and saves Rs 3,86,266.
Frequently asked questions
Should I prepay or invest the lumpsum?
Compare the loan's after-tax rate with what you can earn after tax. The Prepay vs Invest calculator runs both on the same amount. Prepaying is a guaranteed return equal to the loan rate; investing is not.
Is there a charge for part-payment?
None on floating-rate loans to individuals. Fixed-rate loans and loans to companies may carry a charge; check the sanction letter.
When in the loan does prepaying help most?
Early, when the balance and the interest share of each EMI are highest. A prepayment in year two saves far more than the same amount in year fifteen.
Can I keep the EMI and the bank still extends tenure?
Banks default to reducing the EMI because it is what most borrowers expect. State in writing that you want the tenure reduced and the EMI unchanged.
Point the bonus at the balance.
We help clients decide between prepayment and investing, and make sure the bank applies the prepayment the right way.