Prepayment Benefit Calculator

See how much interest you save when you pay a lump sum early.

Formula

How the calculation works

The original EMI is computed from the full loan, and the interest before prepayment is everything above the principal across the whole tenure.

Paying a lump sum cuts the principal to a smaller figure, and holding the EMI the same means the loan finishes sooner, which is where the saving comes from.

The interest saved is the difference between the two totals, and the months saved is how much shorter the new tenure becomes.

Common mistakes

• Assuming the saving is free: the lump sum is money you could otherwise invest, so the real gain is the interest saved minus what that money could have earned.
• Forgetting that banks may charge a prepayment penalty, which eats into the saving shown here.

When to use it

• Use it when you have spare cash and are choosing between clearing part of the loan and investing it.
• It is not the right tool for a monthly top-up; this assumes one single lump sum.

Worked example

On a 2,000,000 loan at 9% for 180 months, a 300,000 prepayment saves about 662,866 in interest and 47.5 months.

Common questions

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Last updated: 2026-10-04