Does prepayment reduce EMI or tenure?
It can do either. You choose: reduce the tenure and keep the EMI the same, or reduce the EMI and keep the tenure the same. This calculator shows both outcomes.
Loans calculator
Loan Prepayment Calculator India
See how a lump-sum loan prepayment changes your loan: reduce the tenure and keep the EMI, or reduce the EMI and keep the tenure. Compares interest, payoff time, and EMI before and after using month-by-month amortization.
Interactive calculator
See what a loan prepayment saves you
Enter your loan and a lump-sum prepayment to compare reducing the tenure versus reducing the EMI. This is an estimate before any bank charges.
Before and after prepayment
How the remaining loan compares with and without the prepayment.
| Before | After | |
|---|---|---|
| Remaining interest | ₹19,31,328 | ₹15,29,429 |
| Payoff time | 15 years | 13 years |
| Monthly EMI | ₹24,618 | ₹24,618 |
| Total paid | ₹44,31,328 | ₹40,29,429 |
You save ₹4,01,899 in interest and finish 2 years sooner.
What to do next
Continue your decision
Formula, example, assumptions, and FAQs — open any section for the detail.
Formula
Monthly interest and EMI
Monthly rate = annual rate ÷ 12 ÷ 100 · EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)P is the outstanding principal, r is the monthly rate, and n is the remaining months. If you leave EMI blank, it is auto-calculated this way; at 0% the EMI is simply P ÷ n.
Month-by-month amortization
Each month: interest = balance × r · principal paid = EMI − interest · balance = balance − principal paidThe loan is simulated month by month rather than with a shortcut, so partial final payments and the exact payoff month are handled correctly.
Applying the prepayment
At the chosen month: balance = balance − prepayment (not below zero)The lump sum reduces the outstanding balance at the month you select. Prepaying earlier removes more future interest.
Reduce tenure vs reduce EMI
Reduce tenure: keep EMI, simulate the shorter payoff · Reduce EMI: new EMI = payment(reduced balance, r, remaining months)Reduce-tenure keeps the EMI and finishes earlier. Reduce-EMI recalculates a lower EMI over the same remaining tenure. Interest saved = original remaining interest − new remaining interest.
Worked example
Example: ₹25,00,000 at 8.5% for 15 years, ₹2,00,000 prepaid after 1 year
A borrower has ₹25,00,000 left at 8.5% over 15 years (EMI about ₹24,618). They prepay ₹2,00,000 after 12 months and choose to reduce the tenure.
Calculation:With no prepayment the remaining interest is about ₹19,31,000 over 180 months. After the ₹2,00,000 prepayment, keeping the EMI the same, the loan closes in about 156 months.
Result:The loan finishes roughly 24 months (2 years) earlier and saves about ₹4,01,900 in interest. Choosing reduce-EMI instead would lower the EMI to about ₹22,579 and save about ₹1,42,700 — less interest, but lighter monthly payments. Figures are estimates before any bank charges.
Assumptions
- The outstanding principal, interest rate, and remaining tenure are entered as they stand today.
- Interest uses a monthly reducing-balance rate of annual rate ÷ 12 and a fixed rate for the whole remaining tenure.
- A single one-time prepayment is applied at the chosen month and reduces the principal directly.
- Reduce-tenure keeps the current EMI; reduce-EMI recalculates the EMI over the same remaining tenure.
- Prepayment or part-payment charges, processing fees, taxes, and insurance are not included.
- Results are rounded to whole rupees and are an estimate, not a lender statement.
Common mistakes
- Assuming every prepayment is free. Some loans, especially fixed-rate ones, charge a prepayment fee.
- Ignoring prepayment or part-payment charges when comparing the saving.
- Prepaying very late in the loan and expecting large savings, when most interest is paid in the early years.
- Choosing a lower EMI when the real goal is to save the most interest.
- Prepaying the emergency fund away and leaving no buffer for emergencies.
- Comparing only the EMI and not the total interest paid.
- Assuming a floating interest rate will stay constant for the whole tenure.
Accuracy notes
The schedule is simulated month by month using a fixed reducing-balance rate, with partial final payments handled and balances never going negative. Amounts are rounded to whole rupees. Actual lender figures can differ because of day-count conventions, rounding, rate resets, and prepayment charges, none of which are modelled.
Frequently asked questions
Which is better: reduce tenure or reduce EMI?
Reducing tenure usually saves more total interest because the loan closes sooner. Reducing EMI lowers your monthly payment, which helps cash flow but saves less interest. The right choice depends on your priorities.
How is interest saved calculated?
The calculator simulates the loan month by month with and without the prepayment, adds up the interest in each case, and shows the difference. Interest saved = original remaining interest − new remaining interest.
Does this include bank charges?
No. Prepayment or part-payment fees, processing charges, taxes, and insurance are not included. Check your loan agreement for any charges before prepaying.
Can this be used for home loans?
Yes. It works for any reducing-balance loan, including home loans, where you know the outstanding principal, rate, and remaining tenure.
Can this be used for personal loans?
Yes, as long as the loan uses reducing-balance interest. Some personal loans have flat-rate interest or higher prepayment charges, so confirm the terms with your lender.
What if my interest rate changes?
This estimate assumes a fixed rate for the remaining tenure. On a floating-rate loan, the EMI or tenure can change when rates move, so the actual saving may differ.
Why can my bank’s number differ?
Banks may use different day-count conventions, rounding, charge schedules, or rate resets. Treat this as a planning estimate and confirm the exact figures with your lender.
This calculator provides a general estimate for planning and education only. It is not a lender statement or financial advice. Actual savings depend on your loan agreement, prepayment charges, rate type, and timing. Confirm figures with your lender, and keep an adequate emergency fund before prepaying.Read the full disclaimer.