How the Loan Prepayment Calculator Works
Enter what you still owe today, your interest rate, and how many years are left. Use the outstanding balance, not the original loan amount.
Add a one-time lump sum, a monthly top-up on your EMI, or both. You can also set how many months from now the lump sum lands, since timing matters a great deal.
Then choose what happens to the loan afterwards. Reducing the tenure means you keep paying the same EMI and simply finish sooner. Reducing the EMI means you keep the original end date and pay less each month.
Reducing the tenure almost always saves considerably more interest, because the loan stops accruing interest years earlier. Reducing the EMI frees up monthly cash flow instead — useful if money is tight, but it costs you.
The calculator simulates every month of the loan rather than approximating, so the savings reflect exactly where in the schedule your prepayment lands.
Formula Used
There's no single closed-form answer here. The loan is simulated month by month, with the prepayment applied at the month you specify:
Each month: Interest = Balance × r, Principal = EMI − Interest, Balance = Balance − Principal (− Prepayment)- BalanceOutstanding principal at the start of the month
- rMonthly interest rate (annual rate ÷ 12 ÷ 100)
- EMIYour regular instalment, plus any monthly top-up
- PrepaymentThe lump sum, applied in the month you choose
Example Calculation
Suppose you owe 50,00,000 at 9% with 20 years left, and you prepay 5,00,000 a year from now while keeping the same EMI.
- Outstanding Amount5,000,000
- Interest Rate9% p.a.
- Remaining Tenure20 years
- Lump Sum500,000 after 12 months
- StrategyReduce tenure
- ResultInterest saved ≈ 17,69,952 · Loan closes 50 months early (15 years 10 months instead of 20 years)
Important Assumptions
- Prepayment charges are not included. Floating-rate loans to individuals generally cannot be charged a foreclosure fee, but fixed-rate loans, personal loans and business loans often carry one of 2–5% on the amount prepaid.
- The interest rate is assumed to stay fixed for the remaining tenure.
- The lump sum is applied immediately after that month's EMI, and is capped at the outstanding balance — you can't prepay more than you owe.
- Lenders vary in how they apply part-payments. Some credit them immediately, others only at the start of the next cycle, which slightly changes the saving.
- Under the reduce-EMI strategy, the new EMI is recalculated on the reduced balance over the remaining months, which is standard practice.
- The calculator compares interest costs only. It doesn't weigh prepaying against investing the same money elsewhere.