What makes this calculator different
Re-amortises your outstanding balance at the same EMI after a one-time or yearly prepayment, showing the months and interest saved. Floating-rate home loans to individuals carry no prepayment charge under RBI rules; check your lender for fixed-rate or non-housing loans.
Common Questions
Loan Prepayment Calculator FAQs
Common questions about the Loan Prepayment Calculator and how to read its results.
Q01
Is prepayment penalty applicable on RBI floating-rate home loans?
No. As per RBI rules, banks and HFCs cannot levy any prepayment penalty on individual borrowers for home loans on a floating interest rate, regardless of the source of funds. Penalties may still apply on fixed-rate loans and on certain non-housing loans.
Q02
Should I prepay my loan or invest the surplus instead?
Compare your loan's effective post-tax cost to expected post-tax investment returns. If your loan rate is higher than the realistic after-tax return on safer investments (FD, debt MF), prepayment usually wins. Equity returns are higher long term but riskier — split the surplus if unsure.
Q03
Which is better — reducing tenure or reducing EMI after prepayment?
Reducing tenure usually saves more interest because you stop paying interest on the remaining balance for fewer months. Reducing EMI keeps cashflow free but extends the interest burden. This calculator assumes tenure reduction (EMI stays the same).
Q04
Can I prepay every year automatically?
Yes. Most banks allow you to set up an annual lump-sum prepayment via standing instructions or a recurring transfer. Choose the 'Yearly' frequency in the calculator to see the cumulative effect.
Q05
Will prepayment affect my CIBIL score?
Prepayment itself does not damage your CIBIL score. In fact, on-time servicing and quicker loan closure usually help. The loan account remains in your credit history for years after closure as a positive 'closed' tradeline.
Q06
How is the new tenure calculated?
We re-amortise the reduced principal at the same EMI you were already paying. The number of months until the balance hits zero is the new tenure.
Q07
Are there tax implications when I prepay?
Under Section 24(b), interest deduction up to Rs 2 lakh per year on a self-occupied home loan continues only as long as you pay interest. Prepayment reduces future interest, so it also reduces this deduction — factor that into the net benefit.
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