Why prepaying early saves so much
In the early years of a loan, most of your EMI goes to interest. Every rupee you prepay cuts the outstanding balance directly, so you stop paying interest on it for the rest of the loan. The earlier you prepay, the bigger the saving. Try moving the one-time payment from month 12 to month 120 to see the difference.
Reduce EMI or reduce tenure?
After a prepayment, banks usually let you either keep the EMI and finish sooner, or keep the end date and lower the EMI. Keeping the EMI (shorter tenure) saves far more interest, and it's what this calculator shows.
Smart prepayment ideas
- Put part of your annual bonus or salary hike toward the loan.
- Raise your EMI by 5–10% every year. Even small increases can cut years off a home loan.
- Keep an emergency fund first. Don't prepay with money you might need soon.
- Compare with investing: if your loan rate is 8.5% and your investments reliably earn more after tax, investing may win.
Frequently asked questions
Is there a prepayment penalty?
Under RBI rules, banks cannot charge prepayment penalties on floating-rate home loans taken by individuals. Fixed-rate and some other loans may carry a charge.
Do I lose tax benefits by prepaying?
Under the old regime you can claim up to ₹2 lakh of home loan interest a year. Prepaying lowers the interest, so the deduction shrinks, but you still save more in interest than you lose in tax benefit.
Estimates only. Assumes a fixed interest rate and that prepayments reduce the tenure while the EMI stays the same.