EMI Calculator with Loan Prepayment Planner
Calculate EMI and see how prepayments cut your loan tenure and interest.
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The Reducing-Balance Formula Indian Banks Actually Use
EMI is calculated as EMI = P × i × (1+i)^n ÷ ((1+i)^n − 1), where P is the loan amount, i the monthly interest rate (annual rate ÷ 12), and n the tenure in months — the reducing-balance method Indian banks use for home, car and personal loans. Because interest is charged only on the outstanding balance, the split between interest and principal inside each fixed EMI shifts over time: early payments are interest-heavy, and the principal share grows every month as the balance shrinks.
Tenure Reduction: Same EMI, Shorter Loan
This calculator models tenure reduction, the default prepayment approach at most Indian banks — your monthly EMI amount stays fixed, but any extra payment reduces the outstanding principal directly, which shortens how many months remain. Even a modest fixed extra amount each month compounds into large interest savings and years cut from the tenure, because every future month's interest is calculated on a smaller balance — run your own loan numbers in the planner above to see the exact figures.
Where a Lump Sum Fits Alongside Monthly Prepayment
A one-time lump sum — a bonus, a maturity payout — has an outsized effect specifically when applied early in the tenure, since it removes principal while the interest burden per rupee outstanding is at its highest. A recurring monthly top-up compounds its benefit differently: smaller per instance, but repeated for the entire remaining life of the loan. Use the prepayment planner above to test either approach, or a combination, against your actual loan numbers.
What is an EMI and how is it calculated?
An Equated Monthly Instalment (EMI) is the fixed amount you pay your lender every month, covering both interest and principal repayment on a home, car, or personal loan. This calculator uses the reducing-balance formula EMI = P × i × (1+i)^n ÷ ((1+i)^n − 1), where P is the loan amount, i the monthly interest rate, and n the tenure in months — the same method Indian banks use. Early in the loan, most of each EMI goes toward interest; the principal share grows every month. The balance chart above makes this visible: the curve falls slowly at first and accelerates toward the end.
How prepayment cuts your loan tenure and interest
Every extra rupee you pay above the EMI goes straight to the outstanding principal, and every future month's interest is calculated on that smaller balance — which is why prepayment compounds in your favour. This calculator models tenure reduction, the default at most Indian banks: your EMI stays the same, but the loan closes early. On a ₹30 lakh home loan at 8.5% over 20 years, an extra ₹5,000 per month typically saves more than ₹7 lakh in interest and closes the loan 4–5 years ahead of schedule. A one-time lumpsum — a bonus or maturity payout — early in the tenure has an outsized effect because it removes principal when the interest burden is at its peak.
Prepay the loan or invest the money?
Prepaying a loan at 8.5% is a guaranteed, tax-free 8.5% return — no equity investment can promise that. The trade-off is opportunity cost: if you expect long-term SIP returns above your loan rate and can tolerate market swings, investing the surplus may build more wealth. RBI rules prohibit prepayment penalties on floating-rate loans to individuals, so for most home loans the prepayment route is friction-free; fixed-rate loans may carry a 2–4% charge, so check your sanction letter. Many borrowers split the surplus between prepayment and a SIP — run both scenarios here and in our SIP calculator to compare with your actual numbers.
Frequently asked questions
How is EMI calculated?
EMI stands for Equated Monthly Instalment — the fixed amount you pay every month. We use the standard formula EMI = P × i × (1+i)^n ÷ ((1+i)^n − 1), where P is the loan amount, i is the monthly interest rate (annual rate ÷ 12), and n is the tenure in months. This matches how Indian banks compute reducing-balance EMIs.
Does prepayment reduce EMI or tenure?
This calculator models tenure reduction — the default at most Indian banks. Your EMI stays the same, but extra payments cut the principal faster, so the loan closes months or years early. Tenure reduction saves significantly more interest than EMI reduction.
Is there a penalty for prepaying a home loan?
RBI rules prohibit prepayment penalties on floating-rate loans to individuals. Fixed-rate loans may carry a charge of 2–4% — check your sanction letter. Always confirm current terms with your lender before prepaying.
Should I prepay my loan or invest the money instead?
Compare your loan's interest rate with your expected post-tax investment return. Prepaying an 8.5% loan is a guaranteed 8.5% return. If you expect equity SIPs to earn more over your horizon and can tolerate the risk, investing may win — many people split the difference.
How much can a small monthly prepayment save?
On a ₹30 lakh loan at 8.5% for 20 years, an extra ₹5,000 per month typically saves over ₹7 lakh in interest and closes the loan roughly 4–5 years early. Use the prepayment toggle above to see exact numbers for your loan.
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