Prepayment Calculator

What Is a Prepayment Calculator?

A prepayment calculator, also known as a loan prepayment calculator or part prepayment calculator, shows how much interest you save and how much your tenure or EMI reduces when you pay a lump sum towards your loan principal in addition to your regular EMI.

It applies to most amortising loans that allow part-prepayments, including home loans, personal loans, car loans, education loans, and business loans and loans against property or other assets. It differs from an EMI calculator, which only estimates your monthly instalment at the time of taking a loan. A prepayment calculator instead shows the effect of a prepayment made during the tenure of an existing loan: how much interest it saves, and how much faster the loan is repaid.

How Does the Loan Prepayment Calculator Work?

The calculator first builds a baseline repayment schedule from your outstanding principal, rate of interest, and remaining tenure. This represents the interest payable if no prepayment is made.

When a prepayment is added, it is applied at the start of the selected month, reducing the outstanding principal from that point onward. The schedule is then recalculated using either of two rules: EMI held constant, so the tenure shortens, or tenure held constant, so the EMI reduces.

Interest saved is the difference between the baseline interest and the interest under the revised schedule. If a prepayment charge is entered, it is deducted from this figure to arrive at net savings, reflecting the actual benefit of prepaying rather than the gross interest reduction.

How to Use the Prepayment Calculator

1. Enter your loan details: outstanding amount, rate of interest (p.a.), and remaining tenure.
2. Add a prepayment. Select One-time for a single lump sum, or Recurring for a fixed amount repeated at regular intervals, such as an annual bonus payout. Enter the amount and the month in which it takes effect.
3. Select Reduce Tenure or Reduce EMI, depending on whether the prepayment should shorten the loan period or lower the monthly instalment.
4. Add a prepayment charge, if applicable, so that net savings reflect this cost.
5. Review the outputs: interest saved, months reduced (or revised EMI), prepayment charges, net savings, and a full yearly/monthly repayment schedule, which can be exported as a CSV.

Worked Example

Consider a home loan of ₹50,00,000 at 8.5% p.a. for a 20 year (240 month) tenure. The regular EMI on this loan works out to ₹43,391, with total interest of ₹54.14 lakh over the full tenure if no prepayment is made.

Now suppose you make a single ₹5,00,000 part prepayment at the start of month 13, roughly one year into the loan. Here's how the two prepayment options compare in the loan prepayment calculator:

Metric	Reduce Tenure	Reduce EMI
EMI after prepayment	₹43,391 (unchanged)	₹38,964
New tenure	192 months (16 years)	240 months (unchanged)
Tenure/months reduced	48 months (4 years)	None
Total interest paid	₹38.10 lakh	₹49.04 lakh
Interest saved	₹16.04 lakh	₹5.09 lakh

The prepayment amount is identical in both cases, yet reducing tenure results in an interest saving of approximately ₹11 lakh more than reducing EMI, as the outstanding principal declines faster when the EMI remains unchanged. This illustrates a key consideration when using the calculator: the same prepayment amount can produce materially different outcomes depending on which option is selected.

Reduce Tenure vs Reduce EMI

The Reduce Tenure option keeps the EMI unchanged and shortens the loan period. Since the outstanding principal reduces faster under this structure, it generally results in a higher interest saving, as illustrated in the example above. 

The Reduce EMI option keeps the tenure unchanged and lowers the monthly outflow from the point of prepayment onward. This may be more suitable for borrowers seeking additional monthly cash flow, for instance following a change in income or expenses.

Many lenders reduce the remaining tenure by default after a part-prepayment, although some allow borrowers to choose between reducing the tenure and reducing the EMI. The applicable option depends on the lender's policy and the borrower's request.

How Prepayment Timing Affects Interest Savings

Interest is calculated on the outstanding principal, which is highest in the early years of a loan. A prepayment made early removes principal before it can accrue interest over a longer period, so it saves more than the same amount prepaid later, when the balance is already lower. You can see this by comparing outputs for different prepayment months on the same loan.

The same logic applies to recurring prepayments: a fixed amount paid at regular intervals acts on a smaller balance each time, so its cumulative effect differs from a single equivalent prepayment made later.

Part Prepayment vs Full Prepayment (Foreclosure)

Part prepayment means paying a portion of the outstanding principal while the loan remains active, with EMIs continuing on the reduced balance under a shorter tenure or a lower EMI.

Full prepayment, or foreclosure, means clearing the entire outstanding balance and closing the loan account. This requires a closure statement from the lender confirming the exact amount payable as of the closure date, including accrued interest and any applicable charges. This figure will differ from calculator estimates, since it depends on the precise date and any pending dues. Foreclosure charges, where applicable, vary by loan type, lender, and prevailing RBI regulations. Always confirm the exact closure amount and any applicable charges with the lender before initiating foreclosure.

Assumptions & Limitations

This calculator assumes a fixed rate of interest for the remaining tenure, a standard reducing-balance EMI structure, and that any lump sum prepayment is applied at the start of the selected month. It does not account for floating-rate resets, EMI moratoriums, or lender-specific rounding and processing conventions. Figures shown are indicative and intended for planning purposes only.

Conclusion

This calculator helps determine how much interest a prepayment will save and whether reducing tenure or EMI is more suitable for a given situation. Confirm the applicable rate type, prepayment conditions, and current charges in your loan agreement before acting on the results. To review a full repayment breakdown without a prepayment, use the Amortization Calculator.

This calculator is intended for planning purposes only and does not constitute a loan offer or financial advice. Actual figures depend on your lender's terms and applicable charges at the time of prepayment.