Loan Prepayment Calculator - Save Interest & Prepay Loan

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Prepayment can be helpful, but is it the best choice for you?

Before you decide, consider whether your money could be better used elsewhere, but first let’s review your loan terms:

Your outstanding principal? *

₹

And the remaining tenure of loan? *

months

What is rate of interest of your loan? *

Based on your inputs, the chart shows your loan repayment over time.

Interest (L.H.S)

Principal (L.H.S)

Loan Balance (R.H.S)

Your EMI is and the total interest payable throughout the loan tenure of 16 months is .

How can you prepay your loan?

Lump-sum prepayment : In case of a windfall.

Annual prepayment : In case of bonuses.

Regular monthly prepayments : In case your income increases.

How often and how much would you prefer to prepay? *

Yearly

₹

It is also important to check for prepayment penalties. Fixed-rate loans, like auto and personal loans, often charge 2% to 5% of the prepayment amount.

What is the prepayment penalty on your loan?

Prepayment will shorten your loan tenure by 16 months

With Prepayment

Without Prepayment

Your EMI of remains the same and your new loan tenure will be months.

Here's how your loan will look after the prepayment :

Interest (L.H.S)

Principal (L.H.S)

Loan Balance (R.H.S)

Before

Your Tenure

16 months

Your Interest paid

₹0

After

Your Tenure

months

Your Interest paid

₹0

Your loan finishes 16 months faster and interest saved by you is ₹0

Note : Your EMI of ₹0 remains the same.

Let's take a step back and consider a few important questions

Am I aware of the prepayment conditions on my loan given by my lender?

Do I have a financial safety net to cover 3-6 months of living expenses in case of unexpected events like job loss or medical emergencies?

Am I saving for other goals like a vacation trip, my children's education, or retirement?

Could the money I'm considering for prepayment potentially earn a higher return if invested wisely?

With so many factors to consider, making the right financial choice can feel difficult, especially without qualified advice.

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All you need to know about Loan Prepayment Calculator

What is loan prepayment?

Loan prepayment refers to paying off part of our loan before the scheduled end date. This can be applied to personal loans, home loans or auto loans.
Prepaying your loan helps reduce the total interest payable over its lifetime and shortens the loan tenure.
Loan prepayment can be a smart financial strategy to manage debt more efficiently while saving on interest and reducing the repayment period.
Using loan prepayment as part of a strategic financial plan can accelerate debt reduction and allow you to reallocate your funds toward investments, retirement savings, emergency funds, or other financial goals.

The impact of loan prepayment on your loan tenure, EMIs and interest

While a loan prepayment calculator can estimate the impact, it’s equally important to understand how prepayment affects loan tenure, total interest paid, and overall financial planning.

Impact on Tenure

Loan prepayment means paying more than the required amount, which directly reduces the outstanding principal.
When your principal amount decreases, the tenure of your loan also shortens.
One of the best ways to calculate the impact of loan prepayment on your loan tenure is by using a loan prepayment calculator.

Impact on Interest

When it comes to loan repayment, there are two primary components you pay back: the principal amount and the interest.
For example, if you borrow ₹10,000, you will have to repay ₹10,000 + interest. The longer the loan tenure, the higher the interest you pay. In some cases, borrowers end up paying more interest than the actual loan amount they borrowed.
Since interest is charged on the outstanding principal, reducing the principal amount significantly lowers the interest burden.
You can easily calculate the impact of interest saving using the loan prepayment calculator.
But those were the positive impacts ; loan prepayment might also come with a penalty.

What is a loan prepayment penalty?

A loan prepayment penalty is a fee that some lenders charge when you pay off your loan earlier than the agreed-upon schedule. This penalty compensates the lender for the interest income they lose due to early repayment.

Lenders impose prepayment penalties to discourage borrowers from refinancing or paying off a loan early, as it affects their anticipated interest earnings.

Loan Type	Prepayment Option	Prepayment Penalty	Additional Notes
Home Loan	All home loans can be prepaid	No penalty for floating rate, penalty for fixed rate	-
Personal Loan	Varies from bank to bank	Varies, may have lock-in period or limits on % prepaid	Prepayment penalties at bank's discretion
Auto Loan	Not all auto loans can be prepaid	Prepayment penalties are levied at bank's discretion	Offered to certain segments, may require a minimum number of EMIs paid

Things to know before you decide on loan prepayment

Loan Tenure Reduction vs. EMI Reduction

Loan prepayment can have two purposes: either you can choose to reduce your loan tenure or reduce your loan EMI amount. Understanding these two is very important while opting for loan prepayment.

Loan repayment to Reduce Loan Tenure

You can shorten your loan tenure by making lump sum payments toward the principal. This approach helps reduce the outstanding principal, loan tenure, and total interest payable. Since interest is calculated on the remaining principal, a lower principal balance leads to significant interest savings.

Loan repayment to Reduce EMI Amount

On the other hand, you can choose to lower your EMIs without shortening the tenure. This results in smaller monthly payments spread over a longer period, but it also means you will end up paying more interest over time.
This is why it’s important for you to calculate how different prepayment strategies affect both your EMIs and your loan tenure to find a balance that saves the most interest and suits your cash flow. For better clarity and the best decision, connect with a financial advisor.

Prepayment Penalty

Some loans, especially those with fixed interest rates, come with prepayment penalties. It’s important to factor in these fees, as they can sometimes cancel out the benefits of prepaying your loan.
That’s why you should calculate the net benefit before making a decision. If the prepayment penalty is higher than the total interest you’d save, then paying off the loan early might not be the best financial move.

Credit Reporting

Making consistent prepayments can have a positive impact on your creditworthiness, as it demonstrates to lenders that you can manage and repay debt responsibly.
It's a good practice to regularly check your credit report to ensure that your prepayments are correctly recorded. Any errors or discrepancies could unfairly lower your credit score, which might affect your ability to secure loans in the future.

Tax Considerations

For home loans, prepaying can lower the interest component, which may reduce the tax deductions you can claim. This needs to be carefully weighed against the benefit of saving on interest payments.
However, prepaying the principal amount of a home loan qualifies for tax exemption under Section 80C of the Income Tax Act, up to ₹1,50,000 per year. To maximise both tax benefits and interest savings, consider consulting with 1 Finance for a holistic prepayment strategy.

Prepayment Conditions

Prepayment terms vary widely depending on the loan type and lender policies. Some loans may have penalties or restrictions on early payments, while others offer flexibility.
It's essential to review your loan agreement or consult with your lender to fully understand the prepayment conditions that apply to your loan.

Benefits of loan prepayment

1. Being Debt-Free Faster

Making prepayments reduces your outstanding loan balance, allowing you to pay off the loan earlier than scheduled. This helps you save on interest and achieve financial freedom sooner.

2. Significant Interest Savings

By prepaying your loan, you reduce the outstanding principal, which in turn lowers the total interest payable over the loan tenure. The earlier you prepay, the more interest you save.

3. Relocate the Amount to a Better Place

The money saved from reduced interest payments can be reinvested into higher-yield financial instruments, such as investments, savings, or other productive assets. This allows for better financial growth and stability.

4. Psychological impact

Clearing off a loan earlier reduces financial stress and provides a sense of relief and security. The peace of mind that comes with having no debt obligations allows you to focus on other financial goals.

Things to remember before loan prepayment

Prioritise high-interest loans like credit card debt or personal loans to reduce your overall interest burden and maximise financial benefits

Make prepayments early in the loan tenure to minimise total interest costs, as interest payments are higher in the initial years.

Check for prepayment penalties to ensure that early repayment provides real financial savings and does not come with unexpected costs.

Maintain financial stability by securing an emergency fund, staying on track with retirement savings, and ensuring liquidity before making extra loan payments.

When is the best time to prepay the home loan?

The ideal time to prepay your home loan is in the early years of the loan tenure. This is because, in the beginning, a large portion of your EMI goes toward paying interest rather than the principal.
By making extra payments early on, you can reduce the principal faster, which in turn lowers the overall interest you pay. This helps you clear your loan sooner and save money in the long run.

What is a loan prepayment calculator?

A Loan Prepayment Calculator is an online tool built by 1 Finance to help you estimate the impact of making extra payments toward your loan. It shows how prepaying a part of the outstanding principal can reduce the loan tenure, total interest paid, and overall repayment burden.
By entering details such as loan amount, interest rate, tenure, and prepayment amount, Our Loan repayment calculator also known as part payment calculator provides instant results, helping you make informed financial decisions.

How does loan prepayment calculator work?

1. Enter Loan Details

Input your outstanding principal amount
Enter the annual interest rate
Provide the original loan tenure (in months or years)

2. Choose Your Prepayment Type

One-time lump sum prepayment
Extra monthly payments to reduce interest gradually
Annual lump sum payments to shorten loan tenure

3. Get Instant Results

The Loan prepayment calculator will show your new loan payoff timeline
It will display total interest savings and revised EMI details (if applicable)

4. Compare and Plan Smartly

Understand the total interest paid with and without prepayment
See your new loan closure date
Use the insights to decide the best repayment strategy

Our Loan Prepayment Calculator helps you make informed decisions by showing the financial impact of early payments, so you can save more money.

Disclaimer

This calculator is provided as a tool to assist in understanding the potential impacts of adjusting your EMI or loan tenure. It is intended for informational and educational purposes only and should not be considered as offering specific financial advice for your loan management decisions. The results and scenarios presented are approximations and should be used as a guide rather than definitive financial solutions. We recommend consulting with your financial advisor for personalised advice and to discuss the options and implications specific to your financial situation.

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