About the Prepayment Calculator
Paying a lump sum towards a running loan reduces the interest you still owe, but you can take that benefit in one of two different ways, and they are not the same. This calculator models both: keeping the EMI the same and finishing the loan sooner, or keeping the tenure the same and paying a smaller EMI from then on.
Who should use this calculator
Anyone who has come into a lump sum (a bonus, maturity of an investment, or savings) and wants to know exactly what prepaying a running home, car or personal loan would save, in rupees, before deciding.
Reduce the EMI or reduce the tenure?
Reducing the tenure almost always saves far more interest, because you stop paying interest sooner, the loan simply ends earlier while your monthly outgo stays the same. Reducing the EMI instead frees up money in your budget every month, which matters if cash flow is tight, but it saves noticeably less interest over the life of the loan. Lenders differ in which one they apply by default when you prepay, so always confirm it and ask for a revised amortisation schedule afterwards.
What you will need before you prepay
- Your latest loan statement showing the outstanding principal
- The exact foreclosure or part-payment amount as on your intended payment date, from your lender
- Confirmation of whether your lender charges a prepayment or foreclosure fee
- A No Objection Certificate if the prepayment closes the loan entirely
Tips before you make a prepayment
- Prepay early, not late. The earlier in the loan you prepay, the more interest it saves, early instalments are mostly interest, later ones are mostly principal.
- Ask your lender which default they apply (reduced EMI or reduced tenure) many apply one automatically unless you specify otherwise.
- Check for a minimum prepayment amount or a fee, especially on fixed-rate and some personal loans.
- Compare prepaying against other uses of the same money, if the loan rate is low and you have a higher-return option available, prepaying is not automatically the best choice.
Not sure which option suits your situation? A Kaithi Finance loan expert can walk you through the trade-off on WhatsApp, free of charge.
Frequently asked questions
Does prepaying a loan reduce the EMI or the tenure?
You normally get to choose. Reducing the tenure saves considerably more interest because you stop paying interest sooner. Reducing the EMI frees up money each month instead, but saves less overall. Lenders differ in their default, so always confirm it.
Is there a penalty for prepaying a loan in India?
It depends on the loan and the lender. Floating-rate home loans to individual borrowers generally carry no prepayment penalty, but fixed-rate loans and some personal loans may charge a fee. Always confirm your lender's specific terms before prepaying.
How much interest can I save by prepaying early?
It depends on your outstanding balance, rate, remaining tenure and how early in the loan you prepay, enter your own figures in the calculator above to see the exact rupee amount for both the reduced-EMI and reduced-tenure options.