Loan Prepayment Calculator — Interest Saved & Tenure Cut

Every prepayment on a long-term loan kills future interest. But where you apply it matters: a $20,000 prepayment in year 2 of a 30-year mortgage saves dramatically more than the same prepayment in year 25. This calculator quantifies the savings — and helps you choose between reducing tenure (max savings) or reducing EMI (cash-flow relief).

Loan Prepayment Calculator

See how much interest you save by prepaying — and whether to reduce tenure or EMI.

$
Rate8.00%
Years15
$

Prepayment Savings

Total Interest Saved–
Original EMI–
New EMI–
Original Tenure–
New Tenure–

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Reduce Tenure vs Reduce EMI

Reduce tenure (default): EMI stays the same, but the loan finishes years earlier. This saves the most interest because the loan is alive for less time.

Reduce EMI: Tenure stays the same, monthly EMI drops. Useful if cash flow is tight, but you save less total interest.

The Math

Original Interest = (EMI × n) − P
New Balance = Outstanding − Prepayment
Reduce-Tenure New n = log(EMI / (EMI − newBal × r)) / log(1 + r)
Reduce-EMI New EMI = newBal × r × (1+r)n / ((1+r)n − 1)

Worked Example

Example: On a $200,000 home loan at 8% with 15 years remaining, prepaying $20,000 today (reduce tenure mode) cuts your tenure by ~2.5 years and saves ~$48,000 in interest. Reduce EMI mode saves about $25,000 in interest but keeps the 15-year clock running.

Should You Prepay or Invest?

Compare your after-tax loan rate to your after-tax expected investment return.

  • Loan rate 8%, marginal tax saving on interest 25% → after-tax loan cost ≈ 6%.
  • Investment expected return 12%, capital-gains tax 15% → after-tax return ≈ 10.2%.
  • In this case investing wins by ~4%. But this is the math — psychologically, debt-free trumps a small return premium for many people.

Best Practices

  • Prepay early. The first 5 years of any 20+ year loan are when most of the interest is paid — that’s when prepayments hurt the bank the most.
  • Maintain emergency fund first. 6 months of expenses in cash before extra prepayments.
  • Check prepayment fees. Floating-rate loans usually have 0% fees; fixed-rate loans 2–3%.
  • Combine partial prepayments + step-up EMI for compound savings.

Frequently Asked Questions

Is there a fee for prepaying?▾
For floating-rate home loans, most regulators (RBI in India, mortgage rules in US/UK) prohibit prepayment fees. For fixed-rate loans, fees of 2–4% are common. Check your loan agreement.
How often can I prepay?▾
Most banks allow unlimited prepayments online — sometimes capped at 25% of outstanding per year on certain products. Check the fine print.
Should I prepay or invest the surplus?▾
Run the after-tax math. Loans below 7% rarely beat equity investing over 15+ years. Loans above 10% (personal loans, credit cards) almost always should be prepaid first.
What if I can prepay only small amounts monthly?▾
Many lenders allow extra principal payments alongside EMI. A $200/month extra payment on a $200,000, 15-year loan can shave 2 years and save ~$25,000 in interest.

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