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Part-prepayment, both options

Loan prepayment calculator

One lump sum off the principal, two honest outcomes: finish earlier with the same EMI, or pay less each month for the rest of the term.

Short answer: ₹3,00,000 off a ₹20,00,000 loan at 8.5% with 15 years left saves about ₹6.06 lakh in interest and finishes the loan 46 months early — if you keep the EMI. Keeping the tenure instead drops the EMI to ₹16,741 and saves much less.

Why the tenure option saves less

Interest is rent on the principal you still owe, charged per month. Shortening the loan removes months of that rent; lowering the EMI keeps every month and only trims the amount. Both feel like a win in the month you do it, and only one of them is.

When not to prepay

Keep six months of expenses in cash before sending money to the bank. A prepayment is irreversible, and an emergency loan costs far more than the interest you saved. If the prepayment would empty your savings, it is not a saving.

Prepayment questions

What happens after a part-prepayment?

The bank offers two options: keep the EMI and shorten the tenure, or keep the tenure and reduce the EMI. The first saves much more interest, which is why lenders mention the second more often. This page computes both so the choice is visible.

How is the interest saving calculated?

The remaining schedule is rebuilt from the outstanding principal: once with the EMI held (new tenure) and once with the tenure held (new EMI). The difference between the interest in the original schedule and the EMI-held schedule is the saving shown.

Are prepayment charges included?

No. Floating-rate home loans to individuals have no prepayment penalty in India, but fixed-rate loans and some personal or car loans do — typically 2–4% of the amount prepaid. Subtract that from the saving before deciding.

Is prepaying always better than investing?

Only if the loan rate beats the post-tax return you would earn. Prepaying 8.5% is a guaranteed 8.5% saving; an investment that returns 8.5% before tax and 6% after is worse. This page gives the saving, not the decision.

Related tools

EMI calculatorThe instalment before you prepay.Amortization scheduleYear-by-year principal and interest.FD calculatorWhat the same money earns instead.