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.

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.

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).

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.

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.

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.

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.

Folio 10 · Loan Prepayment Calculator

Loan Prepayment Calculator

Reviewed by Jay Patel· Last reviewed: 01 Aug 2026

Jay Patel

Co-Founder & Chief Loan Advisor

See how prepayment reduces your loan tenure and interest burden.

What makes this calculator different

Distinguishes RBI-mandated zero-prepayment-charge on floating home loans vs the 2–4% on fixed-rate / non-housing loans; also projects whether to reduce tenure or reduce EMI — the calculator shows both paths so you pick the one that fits your cashflow.

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