Loan prepayment calculator: cut the tenure or the EMI?

The question

You have a lump sum, a bonus or a maturing deposit, and a home loan with years left to run. Prepaying is a guaranteed saving at the loan rate, but the bank will ask one thing: should the prepayment shorten the loan or lower the EMI? The loan prepayment calculator puts both answers side by side for the same money, and a third tab asks whether the money should go to the loan at all.

The inputs

The page opens on the Cut tenure tab. The other two are Cut EMI and Invest it.

Enter what is outstanding today, not the original loan. The calculator treats that balance as a fresh loan over the tenure that is left, which is how your current EMI is set. If you choose a repeat, a checkbox appears, Pay one extra EMI each time, ticked by default. Untick it to enter a fixed Amount each time (₹), which starts at ₹1,00,000.

The outputs

Three boxes: Balance after prepaying, then Months saved (on Cut tenure) or EMI falls by (on Cut EMI), and Interest saved. Below them, "Both ways, same money" lists the interest saved by keeping the EMI and finishing early, the interest saved by keeping the tenure and paying less, and a last line, "Cutting the tenure is ahead by". If you set a repeat, it also counts the prepayments and their total.

Every "interest saved" figure is measured against the same baseline: the interest you would pay with no prepayment, which at the defaults is ₹30,90,124 over the remaining 15 years.

Worked example: ₹5 lakh against ₹40 lakh

At the defaults, the EMI is ₹39,390. A one-off ₹5,00,000 prepayment brings the balance to ₹35,00,000, and then:

Cutting the tenure is ahead by ₹6,64,443. That is not a quirk of these numbers. The calculator states that cutting the tenure always saves more interest for the same prepayment, because the money you no longer pay as EMI is not freed up; it keeps going to the lender and keeps reducing the balance early. Cutting the EMI is a cash-flow choice. It is the right one when the ₹4,924 a month matters more than the extra interest.

Repeating it

Set Repeat a prepayment to Yearly with the extra-EMI box ticked and the lump sum at zero. One extra ₹39,390 a year, applied to the tenure, closes the loan about 25 months early and saves ₹4,67,667, across 13 prepayments totalling ₹5,12,065. Put the ₹5 lakh lump sum back in alongside the yearly extra EMI and the loan ends 56 months early, saving ₹13,11,205 over 11 prepayments that total ₹8,93,896, the ₹5 lakh included.

A fixed ₹1,00,000 a year instead of an extra EMI saves ₹9,45,091 and shortens the loan by about 49 months, over 10 payments. Each run uses the same 15-year baseline, so they can be compared directly.

The third tab: invest it instead

Invest it swaps the lump sum for a Monthly surplus (₹), ₹25,000 by default, and an Expected return, 12% by default. It compares your net worth at the end of the tenure if you prepay every month against investing every month. At the defaults, investing ends ₹14.21 lakh ahead. Set the expected return equal to the 8.5% loan rate and prepaying wins by ₹2.25 lakh, because the invested gains are taxed and the loan saving is not.

The page is explicit about what that comparison cannot say: prepaying earns the loan rate with certainty, while 12% is an average with large swings. The fuller version of this question has its own prepay or invest calculator.

What the calculator does not cover

• Prepayment charges. It assumes none. For loans sanctioned or renewed from 1 January 2026, the RBI's 2025 directions remove charges on floating-rate loans to individuals for non-business purposes. Fixed-rate loans may still carry them.
• Your lender's default. Banks often apply a prepayment to the tenure unless you ask for the EMI to be cut. Tell them which one you want.
• Tax relief. Under the new regime, home-loan interest earns no deduction, so the loan costs its full rate. Under the old regime, interest on a self-occupied home is deductible up to ₹2 lakh a year. All three tabs work on the new-regime basis, with the loan costing its full rate; the note on the Invest it tab explains why the old-regime relief stops helping once your interest passes the ₹2 lakh cap.
• Your emergency fund. A prepayment cannot be withdrawn. Keep liquid money aside first.

Related tools and reading

To see the EMI schedule the prepayment is cutting into, use the home loan EMI calculator. Our post on choosing between a shorter tenure and a smaller EMI covers the same choice at the start of a loan, and when a balance transfer pays covers the other way to cut interest, a lower rate. The guides on how an EMI works and on whether to prepay, refinance or invest explain the arithmetic. Then put your own balance into the loan prepayment calculator. The results are estimates, not lending advice.