A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • Home Loan Prepayment Calculator

    If you’re already in the process of repaying a home loan or are thinking of applying for one, take a look at how prepayments can help you pay it off faster.

    What do you mean by Home Loan Prepayment?

    When you take a loan, you need to repay it every month in the form of EMIs over a tenure of your choice. Now if you have some extra money with you, you can pay it towards your loan before it is due.

    Early repayments are called prepayments. This is usually a large amount, say, 3 times your EMI amount. The prepayments you make go toward reducing the outstanding principal of your loan. When the principal reduces, the interest also reduces proportionately.

    When both the principal and interest components reduce, it results in lowering your EMIs as well. Here, you have two choices. You can keep the tenure constant and lower the EMI amount or you can keep the EMIs constant and reduce your tenure. The latter will help you pay off the housing loan faster. You can also avoid paying extra interest charges that come with longer tenures.

    What is a Home Loan Prepayment Calculator?

    A part payment or prepayment calculator is one that allows you to factor in prepayment plans. The results show you the impact of paying a part your loan in advance.

    How to use the Home Loan Prepayment Calculator

    Using this calculator is fairly simple. All you need to do is input the required details in the respective spaces. The calculator will generate the results automatically.

    How the Home Loan Prepayment Calculator Works

    Let’s now look at how this tool works. We’re assuming the following numbers to illustrate this:

    Loan amount (principal) = Rs.20 lakh

    Tenure = 20 years

    Interest rate = 9% p.a.

    Using an EMI calculator, you will see that your EMI without any prepayment is Rs.17,995.

    Now let’s say you make a prepayment of Rs.1 lakh. Your EMI now will be Rs.17,095. That’s a reduction of Rs.900 every month (5% EMI savings). You can also choose to keep your EMIs at Rs.17,995 and reduce your tenure.

    Using this calculator can help you find out how you can pay off your loan a lot faster.


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