Finance
Prepayment calculator
A prepayment removes principal, and with it every rupee of interest that principal would have attracted for the rest of the tenure. That is why the saving is so much larger than the payment — and why the same amount is worth far more in year two than in year twelve. This page shortens the tenure rather than the instalment, which is the choice that actually saves interest and the one a lender will not make for you unless you ask.
Start with the loan as it stands
Your lender's quoted rate. We hold none.
The prepayment itself — a lump sum, or a permanently raised instalment — is set in the full panel below. Nothing you type leaves the browser.
The method
Why a small payment removes a large amount of interest
One mechanism, and the two ways of using it.
A prepayment does one thing: it removes principal. Because interest is charged on the balance outstanding, every rupee of principal removed today also removes all the interest that rupee would have attracted for the rest of the tenure. That is why the saving is so much larger than the payment.
The same amount saves more the earlier it is paid, because it has more remaining months to act on. A lump sum in year two and the identical sum in year twelve are not the same decision.
After a lump sum, a lender will offer to reduce the instalment or to reduce the tenure. Reducing the tenure saves interest; reducing the instalment mostly does not. This tool holds the instalment and shortens the tenure, and shows you exactly how many months come off.
Raising the instalment permanently is the same mechanism spread thin. A modest increase, held for years, removes principal steadily earlier than the schedule would have.
The fork
Shorter tenure, or smaller instalment
The same prepayment, and two very different outcomes.
Shorten the tenure
You keep paying the same instalment, and the loan simply ends sooner. Every month removed is a month of interest never charged, so this is where the saving is. It is what this calculator models.
Reduce the instalment
You keep paying for the same number of years, at a lower monthly figure. Cash flow improves and the interest saving is comparatively small. It is a reasonable choice if the monthly outgo is the problem — but it should be a choice, not a default applied because nobody said otherwise.
Give the instruction in writing when you make the payment, and ask for the revised schedule in writing afterwards. A prepayment applied one way and remembered the other is a dispute waiting for the year you try to close the loan.
The empty box
Why we ask you for the rate
We ask you for the rate rather than filling one in, and the reason is not caution. No published rate stays current: lenders reprice floating loans against an external benchmark that moves, the figure in an advertisement is the best case for the strongest applicant, and your own rate is set only after your file is assessed. A number typed into a page that is built once and served for months would be wrong within weeks and would look authoritative the entire time. So the page holds no rate, and the answer you get is an answer to the assumption you supplied.
Your figures
Run your own prepayment
The loan as it stands, then the payment you are considering.
The loan, and the prepayment
Enter the loan on its original terms, then either a lump sum and the month you would pay it in, or the amount by which you would raise the instalment permanently.
Your lender's quoted rate. We hold none.
Counted from the first instalment.
Fill the loan and the prepayment and the comparison appears here.
Everything is worked out in your browser. Nothing you type is sent anywhere, stored, or seen by us.
Limits
What this cannot decide for you
Three of them, and the first is a term of your own agreement.
Read before you transfer anything
- Whether you may prepay, in what minimum amount, how often, and at what charge is a term of your loan agreement. Regulatory positions on prepayment charges differ between floating and fixed loans and between borrower types — read your own agreement and ask your lender, in writing.
- The saving computed here is nominal rupees of interest avoided. It is not compared against anything you might otherwise do with the money. This site does not publish returns, yields or comparisons of that kind, and this page does not make one.
- Deductions claimed against home loan interest and principal change with the amount of interest you actually pay. Prepaying alters that. The Income Tax Department publishes the current position under sections 24(b) and 80C of the Income-tax Act, 1961; the ceilings are not transcribed here because they move.
Beyond arithmetic
Three things no calculator can know
Your lender's policy
How much of your income a lender will let you commit, what it counts as income, which of your existing obligations it counts, what share of the price it will lend against, and what it does with a co-applicant are all internal policy. Two lenders reading the same file reach different answers, and neither answer is arithmetic.
Your credit assessment
The rate you are offered is set after your file is assessed — bureau record, employment, existing exposure, the property itself. A rate quoted in an advertisement is the best case for the strongest applicant, and a page that assumed it would be quietly wrong for almost everyone.
The rate on the day you sign
Floating rates reprice against an external benchmark, and the benchmark moves. Any schedule computed today is a picture of one assumption held flat for the whole tenure, which is the one thing a floating rate never does.
Questions
Questions this page is asked
- Should a lump sum reduce my instalment or my tenure?
- Reducing the tenure saves interest; reducing the instalment largely does not. Lenders will often default to reducing the instalment because that is the request it more usually receives, so the instruction has to be given explicitly and in writing.
- Why does prepaying early save so much more?
- Because the interest a rupee of principal would have attracted is proportional to how long it would have stayed outstanding. The same amount paid in year two removes far more future interest than the identical amount in year twelve.
- Can my lender charge me for prepaying?
- That is a term of your loan agreement, and the regulatory position differs between floating and fixed loans and between borrower types. Read your agreement and get your lender's answer in writing before you transfer anything.
Sources
Who publishes what, and what we do not publish
This page holds no rate of any kind. Where a current figure is needed, the body that publishes it is named and linked here.
Regulates the banks and housing finance companies that set lending rates, and publishes the policy rate and the master directions on external benchmark lending rates. The current rate on any product is the lender's to publish, not ours.
The register on which a Karnataka project's registration, its declared timelines and its uploaded agreement format can be checked before any payment is made.
The equivalent register for a Tamil Nadu project, and the authority to whom a complaint about a payment demand in that state is made.
Income Tax Department
Income Tax Department, Government of India (opens in a new tab)www.incometax.gov.in
Publishes the current position on deductions claimed against home loan interest and principal, including the ceilings and the conditions, which change by Finance Act and are not transcribed here.
Every address above was opened on . Government sites move their pages; if one of these no longer resolves, the fact it holds up is unverified until someone finds where it went, not true because it was true once.
Next
Where to go from here
These tools are meant to be used together — an instalment is only half a decision until you have seen what the schedule, the plan and the paperwork do to it.
Get the revised schedule in writing
A prepayment is only worth what the lender applies it to. Instruct in writing that the tenure be reduced, and ask for the reissued schedule afterwards — it is the only proof of what happened.