See how extra EMI payments and prepayments can reduce your loan tenure and save thousands in interest.
Use this free home loan prepayment planner to estimate how much interest you can save by making extra EMI payments, yearly prepayments, or lump-sum part payments.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
Yes, typically by 4 to 5 years on a 20-year loan.
Paying one extra EMI every year directly reduces your outstanding principal. On a typical 20-year home loan at 8.5%, this single habit shortens the loan by 4–5 years and cuts total interest by 15–20%.
Yes. Interest is calculated on remaining principal.
Home loan interest is calculated on the outstanding principal each month. When you prepay, the principal drops immediately, and every future interest calculation uses the new, lower number.
Reduce tenure to save more interest.
Keeping the EMI fixed and reducing tenure saves significantly more interest than reducing your EMI. Choose tenure reduction if your income is stable; choose EMI reduction if you need monthly cash-flow relief.
Usually not, on floating-rate loans for individual borrowers.
On most floating-rate home loans for individual borrowers, banks do not charge prepayment penalties. Fixed-rate loans may carry a small charge. Confirm with your bank or sanction letter.
The mechanics in short answers — no jargon, no upsell.
Banks apply your interest rate to whatever you still owe, every month. Early in the loan, your principal is huge, so most of your EMI goes to interest.
Any payment above your EMI goes 100% to principal. The next month, interest is calculated on the new, smaller number, and so does every month after that.
A prepayment in year 2 of a 20-year loan saves multiples of what the same amount saves in year 18. Time is the multiplier.
When the bank offers a choice, keeping the EMI fixed and reducing tenure almost always saves more interest than lowering your EMI.
Designed so anyone can model their situation in under a minute, with or without a finance background.
Cut 15–35% off the total interest you would otherwise pay over the loan lifetime.
Shave 3–8 years off a typical 20-year tenure with modest, sustainable prepayments.
A smaller outstanding loan means lower risk if your income changes or rates rise.
Watching your debt-free date move forward is its own compounding reward.
A smaller principal reduces the rupee impact of any future interest-rate increase.
Once the loan ends early, that EMI returns to your monthly budget, for years.
Everything you might ask before, during, or after using this tool.
Compare your home loan rate to your realistic after-tax investment return. If your loan rate is meaningfully higher, prepay. If you have high conviction that markets will outperform after tax and fees, invest. For most borrowers with home loan rates above 7%, prepayment is the mathematically stronger choice.
Yes, almost always. Reducing tenure (keeping EMI fixed) saves much more interest because you continue paying at the original rate against a shrinking balance. Reducing EMI lowers your monthly outflow but stretches the loan and increases total interest paid.
On most floating-rate home loans for individual borrowers, banks do not charge prepayment penalties — you can prepay any amount, any number of times. Fixed-rate loans may carry a 1–2% prepayment charge; confirm with your bank or sanction letter.
You continue to claim available tax deductions on the principal and interest paid during the year. Prepayment may shorten the years over which you receive these deductions, but the total benefit is rarely a reason to delay prepayment.
Yes. Most banks let you make part payments via net banking with no minimum frequency. Small, regular prepayments work just as well as a single large one — what matters is reducing principal early.
A part payment is any one-time amount you pay above your scheduled EMI. It is applied directly to your outstanding principal, which then reduces every future month's interest calculation. Most banks process part payments within 1–2 business days.
No. Most banks default to tenure reduction after a prepayment, meaning your EMI stays the same and the loan ends earlier. If you want your EMI to drop instead, you usually have to request it in writing.
Prepayment is a guaranteed, risk-free return equal to your loan rate. Investing is variable, taxed, and has costs. If your loan rate is higher than your after-tax expected investment return, prepay. A 50/50 split is also a reasonable strategy if you cannot decide.
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The best time to prepay is the first half of your loan's life. That is when the EMI is still mostly interest, and a single unit of principal removed compounds into many units of saved interest. If you're past the midpoint, prepayment still helps, but the leverage shrinks each year.
Don't prepay if it means draining your emergency fund. Three to six months of expenses, liquid and untouched, comes first. Prepayment second.
The math is unromantic. Subtract tax from your expected investment return. If that net number is meaningfully higher than your home loan rate, say, by 2 percentage points or more, invest. If it isn't, prepay. With home loan rates above 7% in 2026, the bar for "investing wins" is high.
For most people, the right answer is "both, but not equally." A 70/30 split toward prepayment for risk-averse savers, or 30/70 toward investing for younger earners with high risk tolerance, are both reasonable.
Dramatically. A prepayment in year 2 of a 20-year loan at 8.5% saves several multiples of what the same amount saves in year 18. Time is the multiplier, and the calculator above quantifies your specific case.
By default, most banks keep your EMI the same and reduce your loan tenure. Your interest schedule is recomputed, and you'll see your "remaining tenure" drop in the next statement. If you'd prefer the bank to reduce your EMI instead of the tenure, you typically need to request that in writing.
Two short notes worth reading before you trust any number on this page.
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We are not a bank, NBFC, advisor, broker, or distributor of any financial product. The numbers shown here are estimates for educational purposes only, based on the inputs you provide.
Results are not financial, legal, or tax advice. Please consult a qualified professional before any decision about your loan, investments, or personal finances. Actual loan terms and charges depend on your bank and individual circumstances.