Loan Prepayment Calculator

Why prepayment saves interest

Interest is charged on the balance. When you prepay, the balance falls immediately, so every later month's interest is lower. The earlier you prepay, the longer that saving compounds, which is why prepayment in the first few years matters most.

Shorten the tenure or lower the EMI?

You can keep the EMI and finish earlier, or keep the tenure and pay a lower EMI. Shortening the tenure almost always saves more interest, because you keep paying the higher amount. Lowering the EMI improves monthly cash flow instead.

Formula

Where:

P

= Original loan amount

r

= Monthly interest rate

k

= Number of EMIs paid before the prepayment

m

= Months remaining

Example calculation

Important notes

• Lenders may charge a prepayment fee on some loans; fees are not included.
• The prepayment must be less than the balance at that point.

Disclaimer: This calculator provides estimates for informational purposes and should not be considered financial advice. Actual figures from lenders, banks and investment products can differ because of fees, taxes, rounding rules and changing rates. Consult a qualified professional before making financial decisions.