Loan Prepayment Calculator - Calculate Your Savings
Calculate how much interest you can save by making prepayments. See exactly how much sooner you can be debt-free.
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Calculation Summary
Visualizations
Interest Comparison
Payment Breakdown
Balance Over Time
Amortization Schedule with Prepayment
About Loan Prepayment Calculator
Why Make Prepayments?
Making prepayments on your loan is one of the most effective ways to save money on interest and become debt-free sooner. When you make an extra payment, it goes directly toward reducing your principal balance, which means less interest accrues in subsequent months.
How Prepayments Work
When you make a prepayment, the money is applied to your principal balance. Since interest is calculated on the outstanding balance, a lower balance means less interest charged. Most lenders offer two strategies: reduce your EMI or reduce your tenure. This calculator uses the "Reduce Tenure" strategy, which keeps your EMI the same but shortens the loan period.
Benefits of Early Prepayments
The earlier you make prepayments, the more you save. This is because interest has less time to compound on a smaller balance. Even small regular prepayments can result in significant savings over the life of the loan.
Frequently Asked Questions
Does prepayment reduce interest?
Yes, making prepayments reduces your outstanding principal balance, which in turn reduces the interest charged in subsequent months. This results in total interest savings over the loan tenure.
What is the best prepayment strategy?
There are two main strategies: reducing tenure or reducing EMI. Reducing tenure is usually better as it saves more interest over the long term. This calculator uses the "Reduce Tenure" strategy.
How does prepayment frequency affect savings?
More frequent prepayments lead to greater savings because the principal is reduced more often, resulting in lower interest charges each month. Monthly prepayments generally save more than yearly prepayments.
When should I start making prepayments?
The earlier you start, the better. Most of the interest is paid in the initial years of the loan. Starting prepayments from the second year onwards can result in significant savings.