Why prepaying early saves so much
In the first years of a long loan, most of each EMI is interest. A prepayment reduces the principal that interest is charged on for every remaining month, so ₹5 lakh paid in year 2 of a 20-year home loan can save over ₹10 lakh in interest and shorten the loan by several years.
Reduce tenure or reduce EMI?
Keeping the EMI unchanged and shortening the tenure saves the most interest. Reducing the EMI helps only if you need monthly breathing room. This calculator assumes the EMI stays the same.
Prepayment charges
RBI rules prohibit prepayment penalties on floating-rate loans to individuals. Fixed-rate loans may carry a 2–4% charge, so check your sanction letter.
Frequently asked questions
Should I prepay or invest the money?
If your expected post-tax investment return is below the loan rate, prepaying is the safer win. At 8.5% home loan rates it is close; for personal loans at 14%+, prepay.
Does prepayment affect my credit score?
No negative effect. Closing a loan early is recorded as a positive repayment history.
Is there a minimum prepayment amount?
Many banks require at least one EMI's worth; some set ₹10,000 or similar minimums.